Activity 1: Credit Scores Your Fair Isaacs Corporation (FICO) credit score is us
ID: 3302251 • Letter: A
Question
Activity 1: Credit Scores Your Fair Isaacs Corporation (FICO) credit score is used to determine your creditworthiness. It is used to help determine whether you qualify for a mortgage or credit and is even used to determine insurance rates. FICO scores have a range of 300 to 850, with a higher score indicating a better credit history. The given data represent the interest rate (in percent) a bank would offer on a 36-month auto loan for various FICO scores.
Credit Score
Interest Rate (percent)
545
18.982
595
17.967
640
12.218
675
8.612
705
6.680
750
5.150
Source: www.myfico.com
Which variable is the explanatory variable? Which variable is the response variable? (Hint: You need to read the problem first)
Explanatory Variable
Response Variable
Credit Score
Interest Rate (percent)
545
18.982
595
17.967
640
12.218
675
8.612
705
6.680
750
5.150
Explanation / Answer
Which variable is the explanatory variable? Which variable is the response variable? (Hint: You need to read the problem first)
Answer:
Explanatory Variable: Credit Score
Response Variable: Interest Rate
Explanation: For the given scenario, the dependent variable or response variable is given as the interest rate and independent variable or explanatory variable or predictor is given as credit score because we determine the interest rate based on the credit score. This means interest rates are depends on the credit scores. Credit scores explain interest rate for the given scenario. For any credit score, we will find the response as the interest rate by using linear regression model.
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