To develop a model, a creditor selects a random
sample of its customers, or a sample of similar customers if their sample
is not large enough, and analyzes it statistically to identify
characteristics that relate to creditworthiness. Then, each of these
factors is assigned a weight based on how strong a predictor it is of who
would be a good credit risk. Each creditor may use its own credit scoring
model, different scoring models for different types of credit, or a
generic model developed by a credit scoring company.
Under the Equal Credit Opportunity Act, a credit scoring system may not
use certain characteristics like -- race, sex, marital status, national
origin, or religion -- as factors. However, creditors are allowed to use
age in properly designed scoring systems. But any scoring system that
includes age must give equal treatment to elderly applicants.
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