CCM Credit Scoring & Rating Systems

Question 1

What is the numerical range of FICO credit scores?

Accepted Answer

300–850

Answer

FICO scores range from 300 to 850, with higher scores indicating lower credit risk to lenders.

Question 2

What is the Altman Z-Score model primarily used to predict?

Accepted Answer

The probability of corporate bankruptcy within two years

Answer

Developed by Edward Altman in 1968, the Z-Score combines multiple financial ratios to predict the likelihood of corporate bankruptcy.

Question 3

Which factor carries the greatest weight in calculating a FICO credit score?

Accepted Answer

Payment history

Answer

Payment history accounts for approximately 35% of a FICO score, making it the single most heavily weighted component.

Question 4

Dun & Bradstreet's PAYDEX score for business credit ranges from:

Accepted Answer

1 to 100

Answer

The PAYDEX score ranges from 1 to 100, where a score of 80 indicates invoices are paid exactly on time and higher scores reflect early payment.

Question 5

What is the primary purpose of a credit scoring model in commercial credit management?

Accepted Answer

To objectively quantify and rank the risk of extending credit to a customer

Answer

Credit scoring models provide an objective, consistent method to quantify credit risk, enabling credit managers to make more uniform and data-driven decisions.

(CCM) Certified Credit Manager Practice Test

(CCM) Certified Credit Manager Practice Test

CCM Credit Scoring & Rating Systems