Rating and credit limit: definitions and background

Today, banks are the main consumers and generators of credit scores on their customers. This has been further enhanced since 2004, when the Basel Committee1 published a review of the agreement of 1998 to regulate minimum capital requirements: Basel 2. The Web site of the Bank for International Settlements reports that “The changes aimed at rewarding and encouraging continued improvements in risk measurement and control”. One of the major changes on risk measurement involved the insolvency risk, accelerating the development and the adoption of credit scoring methods.