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

Which is the primary purpose of behavioral scoring in the retail credit lifecycle?

Behavioral scoring is used to manage existing accounts. It uses recent payment and utilization behavior to guide decisions on limit changes, authorizations and collections, whereas application scoring is used at origination for new applicants.

  1. AManaging existing accounts, such as limit changes, authorization and collections actions, using recent account performanceCorrect
  2. BDeciding whether to approve new applicants using only application data
  3. CEstimating the market price of securitized retail pools
  4. DReplacing all policy rules and manual overrides

Explanation

Behavioral scores use post-origination performance data such as payment patterns and utilization to guide account management decisions. Application scoring handles new applicants, and behavioral scoring does not price securitizations or remove policy rules.

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