Question

If a bank uses credit risk score to determine who will receive a loan, the credit risk score would be considered the:

1. dependent variable
2. independent variable
3. response variable
4. classification variable

Answer 1

The credit risk score used by a bank to determine loan eligibility is an independent variable, as it influences the dependent variable, which is the loan approval.

Step-by-step explanation:

When a bank uses a credit risk score to determine eligibility for a loan, the credit risk score would be considered the independent variable. This is because the credit risk score is the factor that influences whether the loan is approved or not.

The approval of the loan, which is the outcome being measured, is the dependent variable. In banking, the credit score acts as a predictor of creditworthiness, based on an individual's credit history and their reliability in repaying debts, such as those from credit cards.

Banks may also consider other factors like savings and other investments before deciding.