Judgmental Credit Analysis

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Credit

    1. A contractual agreement in which a borrower receives something ...
  2. Bond

    A debt investment in which an investor loans money to an entity ...
  3. Credit Analysis

    A type of analysis an investor or bond portfolio manager performs ...
  4. Credit Rating

    An assessment of the credit worthiness of a borrower in general ...
  5. Good Credit

    A qualification of an individual's credit history that indicates ...
  6. Bad Credit

    A qualification of an individual's credit history that indicates ...
Related Articles
  1. What Is A Corporate Credit Rating?
    Investing Basics

    What Is A Corporate Credit Rating?

  2. Corporate Bonds: An Introduction To ...
    Bonds & Fixed Income

    Corporate Bonds: An Introduction To ...

  3. What Is A Cash Flow Statement?
    Markets

    What Is A Cash Flow Statement?

  4. An Overview Of Corporate Bankruptcy
    Bonds & Fixed Income

    An Overview Of Corporate Bankruptcy

Hot Definitions
  1. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  2. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  3. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  4. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  5. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  6. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
Trading Center