Headcoun (10 Mr. Brown is a wage earner who has held his present job for 22 mont

Question

Headcoun (10 Mr. Brown is a wage earner who has held his present job for 22 months. He has lived at his current rented apartment for i1 months, His credit report is excellent, and there are 3 credit cards actively using. Yesterday, Brown opened an account in the Netwest Baik and deposited fits $350. Today Brown asks for a $4,500 loan to purchase a car and some furniture. Netwest Bank uses a credit scoring system to evaluate most consumer loans, and will refuse the loan application if the applicant gets less than 30 in the scoring system. Suppose you are one of the staff in this bank Borrower's length of employment in the present jolb: Deposit account with bank: More than one year Less than one year 6 points 3 points Yes No 5 points 2 points Borrower's length of time at current address: Credit cards currently active: More than 2 years One to two years Less than one year 8 points 4 poiats 2 points One card Two cards More than two cards 6 points 4points 2 points Borrower's current home situation: Credit bureau report: Owns home Rents hone Lives with frlend or relative 7 points 4 points 2 points Excellent Average Below average or no record 8 points 5points 2 points 2 (1) Would you make this loan to Mr. Brown? Why? (2) Are there any factors not included in the scoring system which may be important for you to make the decision?Please give 2 examples of other important factors and explain

Explanation / Answer

Credit Score of Mr.Brown = 6 (employment in present job is for more than a year) +2 (lived in current address for less than one year) + 4 (lives in a rented home) + 5 (has a deposit account with the bank) + 2 (has more than 2 active credit cards) + 8 (has an excellent credit bureau report) = 27

1) According to the Back loan is only given to clients with a credit score of more than 30 and since Mr.Brown has a credit score of 27, he won't be given a loan.

2) Other factors that might be included in the credit scoring system are:

The number of children - Since the expenditure increases with more children, a loan could be given to those who have one or no children.

Martial status - People who are married are considered to be more stable financially and could be given a loan.

Income - People could be divided into income groups and those with a higher income could be given preference while giving a loan.

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