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Justify whether you would you make this loan for two years as they have requested or not? 2) Discuss the key features of a standard credit model.

Justify whether you would you make this loan for two years as they have requested or not? 2) Discuss the key features of a standard credit model.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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1) Ecobank uses a credit-scoring system to evaluate most consumer loans that amount to more than C40000. The key factors used in its scoring system are shown in the table below. The Badu family has two wage earners who have held their present jobs for 20 months. They have lived at their current street address for one year, where they rent on a five-month lease. Their credit report is excellent but shows only one previous charge. However, they are actively using two credit cards right now to help with household expenses. Yesterday, they opened an account at Ecobank and deposited C3000. Badu's have asked for a C50000 loan to purchase a used car and some furniture. The bank has a cut-off score in its scoring system of 30 points. Borrower's length of employment in his/her present job: More than one year Less than one year 3 points Borrower's length of time at current address: More than 2 years One to two years Less than one year Borrower's current home situation: 6 points Owns home Rents home or apartment Lives with friend or relative 8 points 4 points 2 points 7 points 4 points 2 points Credit bureau report: Excellent Average Below average or no record Two cards 8 points 5 points Credit cards currently active: One card More than two cards 2 points 6 points 4 points 2 points Deposit account(s) with bank: Yes No 5 points 2 points Required: Justify whether you would you make this loan for two years as they have requested or not? 2) Discuss the key features of a standard credit model.
Transcribed Image Text:1) Ecobank uses a credit-scoring system to evaluate most consumer loans that amount to more than C40000. The key factors used in its scoring system are shown in the table below. The Badu family has two wage earners who have held their present jobs for 20 months. They have lived at their current street address for one year, where they rent on a five-month lease. Their credit report is excellent but shows only one previous charge. However, they are actively using two credit cards right now to help with household expenses. Yesterday, they opened an account at Ecobank and deposited C3000. Badu's have asked for a C50000 loan to purchase a used car and some furniture. The bank has a cut-off score in its scoring system of 30 points. Borrower's length of employment in his/her present job: More than one year Less than one year 3 points Borrower's length of time at current address: More than 2 years One to two years Less than one year Borrower's current home situation: 6 points Owns home Rents home or apartment Lives with friend or relative 8 points 4 points 2 points 7 points 4 points 2 points Credit bureau report: Excellent Average Below average or no record Two cards 8 points 5 points Credit cards currently active: One card More than two cards 2 points 6 points 4 points 2 points Deposit account(s) with bank: Yes No 5 points 2 points Required: Justify whether you would you make this loan for two years as they have requested or not? 2) Discuss the key features of a standard credit model.
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