Question

In: Economics

List the variables in order of importance. Which variables were not significant? Age in years College...

List the variables in order of importance. Which variables were not significant?

Age in years

College Education

Years with current employer

Years at current address

Household income in thousands

Debt to income ratio (x100)

Credit card debt in thousands

Other debt in thousands

Credit Risk Score

Previously Defaulted

Expert Solution

Not significant: college education

This variable of a borrower is not so important to a loan providing institute or a bank. It is so because although the borrower has high college education, then also he/she may have other faults like the low credit score or previously a defaulter. In such case the loan can’t be granted to him/her.

Other options are very significant:

Age: this settles the tenure of loan.

Years in employment: this establishes stability of the borrower in respect of his/her income.

Address: this establishes flawless communication.

Household income: this if the income is low, repayments would be at risk.

Debt to income: this shows how the borrower is obligated till now.

Credit card: this also shows the borrower’s payment obligation.

Other debt: same as above

Credit score: if the score is high, the borrower is reliable to make payments.

Previously defaulted: this reduces credit score and can make the loan not sanctioned.

Rahul Sunny answered 8 months ago

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