In a nutshell, credit scoring is a statistical method of assessing the credit risk of a loan applicant. The score is a number that rates the likelihood an individual will pay back a loan. Credit scoring was first developed in the 1950s, but has come into increasing use in just the last two decades.

• Past, delinquent or derogatory payment behavior.
• The current level of indebtedness.
• The length of credit history.
• The types of credit.
• How often credit is applied for.
• The number of credit inquiries.

When there are minor indications of derogatory credit, prudent judgement should be used when determining whether additional clarifying information is needed. for example, the appearance of an occasional late payment may not need an explanation if the applicant had otherwise good payment history. Determine the applicant's willingness to pay obligations by evaluating:

1. The age of the account
2. The frequncy and severity of the late payments
3. The size of the account balance
4. How long ago the late payments occured
5. The status of the applicant's other credit accounts