The First Installment Of A Fiveinstallment Series

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The Federal Reserve Bank of St. Louis

Mortgage Credit Partnership Credit Scoring Committee o o o o

Credit scoring is an underwriting tool used to evaluate the creditworthiness of prospective borrowers. Utilized for several decades to underwrite certain forms of consumer credit, scoring has come into common use in the mortgage lending industry only within the last 10 years. Scoring brings a high level of efficiency to the underwriting process, but it also has raised concerns about fair lending with regard to historically underserved populations.

In order to explore the potential impact of credit scoring on mortgage applicants, the Federal Reserve System's Mortgage Credit Partnership Credit Scoring Committee has produced a five-installment series. This first installment provides a context for the subsequent installments. An important goal of this series is to provide the industry, concerned groups and individuals the opportunity to comment on issues surrounding credit scoring.

This installment incorporates statements requested from the four organizations listed in the next column. They were selected because of their interest in and differing perspectives on credit scoring and fair lending.


A stockholder-owned corporation chartered by Congress to create a continuous flow of funds to mortgage lenders in support of homeownership and rental housing. It serves as a secondary market for mortgage loans by purchasing mortgages from lenders across the country and packaging them into securities that can be sold to investors.


Originally an operations research consulting firm, Fair, Isaac and Company, Inc. introduced the use of credit scoring for risk management in the financial services industry. They apply statistical decision theory to business decisions through the development of predictive and decision models.

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Borrowing Basics

Borrowing Basics

Some small business persons cannot understand why a lending institution refused to lend them money. Others have no trouble getting funds, but they are surprised to find strings attached to their loans.

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