What's the point of credit scoring?

TLDR

Credit scoring is widely used in consumer and mortgage lending and is expanding into small‑business lending. The article examines the implications of credit scoring for the commercial loan industry and its potential benefits for small businesses. The author explains credit‑scoring fundamentals, reviews common models, and considers the broader implications of its adoption.

Abstract

Credit scoring is already widely used for consumer lending and is becoming more commonly used in mortgage lending. Now, small business lending is getting into the scoring act. What does this mean for the commercial loan industry? And will it benefit small businesses? In this article, Loretta Mester explains the basics of credit scoring, discusses some of the models used, and looks at some of the implications of the wider use of credit scoring.