Percentage utilisation: This is the proportion of available credit that is used. For example if…

Percentage utilisation: This is the
proportion of available credit that is used. For example if one’s credit limit
(sum of all credit cards and lines of credit) is $50000 and that individual
owes $10000, the utilisation is 0.20. Worst rating: This records whether an
individual has missed payments on loans or credit cards. For example, suppose
that someone was two months late paying one credit card and four months late
paying another. The worst rating would be recorded as 4. (This variable is
sometimes recorded as the number of days late.) Number of open trades: This
statistic is the number
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Percentage utilisation: This is the
proportion of available credit that is used. For example if one’s credit limit
(sum of all credit cards and lines of credit) is $50000 and that individual
owes $10000, the utilisation is 0.20. Worst rating: This records whether an
individual has missed payments on loans or credit cards. For example, suppose
that someone was two months late paying one credit card and four months late
paying another. The worst rating would be recorded as 4. (This variable is
sometimes recorded as the number of days late.) Number of open trades: This
statistic is the number of credit cards and lines of credit that the individual
has applied for in the past two years. The following logistic regression
analysis was supplied by SCORE. Once again, the coefficients were slightly
altered. The model is

The bank has an application from an
individual. A check with a credit bureau indicates that she currently has a
credit limit of $60000 of which $15000 is owed, at one time she was three
months late in paying a credit card, and she has applied for one more credit
card in the last two years. Use the logistic regression equation to determine
the probability that the applicant will repay the loan.

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