What is a Credit Scoring System?
What is a demonstrably and statistically sound, empirically derived credit scoring system and why do we care? We care because ECOA and Regulation B define credit scoring system. The credit scoring system must be empirically derived, meaning derived from real data. This must be either the creditor’s own data or comparable data. Second, the system must be developed using recognized principles of statistics. That’s the demonstrably and statistically sound part. Now, why do we care? We care because in order to consider the applicant’s age, the credit scoring system must be empirically derived and demonstrably and statistically sound. Any system that considers the applicant’s age must satisfy the Regulation B requirements. Generally, systems that consider the applicant’s age are developed for specific consumer credit products such as credit cards. When using a system that considers the applicant’s age, review the system to ensure that the treatment of age complies with the Regulation B requ
