To develop a credit scoring system or model, a creditor or insurance company selects a random sample of customers and analyzes it statistically to identify characteristics that relate to risk. Each of the characteristics then is assigned a weight based on how strong a predictor it is of who would be a good risk. Each company may use its own scoring model, different scoring models for different types of credit or insurance, or a generic model developed by a scoring company.
Under the Equal Credit Opportunity Act (ECOA), a creditor's scoring system may not use certain characteristics - for example, race, sex, marital status, national origin, or religion - as factors. The law allows creditors to use age, but any credit scoring system that includes age must give equal treatment to applicants who are elderly.