Creditworthiness Assessment Model

From Open Risk Manual


A Creditworthiness Assessment Model is any Credit Risk Model that is used by an organization to assess Credit Risk (Creditworthiness) on an individual transaction or obligor level.

EBA Guidance

When using automated models for Creditworthiness assessment and credit decision-making, institutions should[1] understand the models used, and their methodology, input data, assumptions, limitations and outputs, and should have in place:

  • internal policies and procedures detecting and preventing bias and ensuring the quality of the input data;
  • measures to ensure the traceability, auditability, and robustness and resilience of the inputs and outputs;
  • internal policies and procedures ensuring that the quality of the model output is regularly assessed, using measures appropriate to the model’s use, including backtesting the performance of the model;
  • control mechanisms, model Overrides and escalation procedures within the regular credit decision-making framework, including qualitative approaches, qualitative risk assessment tools (including expert judgement and critical analysis) and quantitative limits.

Institutions should have adequate model documentation that covers:

  • methodology, assumptions and data inputs, and an approach to detecting and preventing bias and ensuring the quality of input data;
  • the use of model outputs in the decision-making process and the monitoring of these automated decisions on the overall quality of the portfolio or products in which these models are used.

See Also


  1. EBA, Guidelines on loan origination and monitoring EBA/GL/2020/06