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FRM Part II · FRM Exam Part II · Credit Scoring and Retail Credit Risk Management

A card issuer sees rising utilization and increased cash advances on an account that has always paid on time. Which account management action is most consistent with proactive risk control?

The issuer should review the account with updated behavioral scores and consider freezing limit increases or reducing exposure. Rising utilization and cash advances are early warning signs, so proactive, score-based action is better than raising limits, waiting until late delinquency, or closing accounts without analysis.

  1. AAutomatically increase the credit limit to retain the customer
  2. BReview the account using updated behavioral scores and consider freezing limit increases or reducing exposureCorrect
  3. CIgnore the pattern until the account is 90 days past due
  4. DClose the account without reviewing the score

Explanation

Rising utilization and cash advances are early warning signs of stress. Proactive account management uses updated behavioral scores to decide on limit holds or reductions. Raising limits adds exposure to a possibly deteriorating borrower, while waiting or closing blindly is not risk-based.

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