Judgmental Credit Analysis

DEFINITION of 'Judgmental Credit Analysis'

A method of approving or denying credit based on the lender's judgment rather than on a particular credit scoring model. Judgmental credit analysis entails evaluating the borrowers application and using prior experience dealing with similar applicants to determine credit approval. This process avoids using any algorithms or empirical process to determine approvals.

BREAKING DOWN 'Judgmental Credit Analysis'

Often times, small banks will use judgmental credit analysis due to the fact that it would not be economical for them to develop a credit scoring system or hire a third party to establish credit scores. On the other hand, large banks often have more automated credit processes, due to the volume of applications they receive.