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Fundamentals of Statistics | 4th Edition | ISBN: 9780321838704 | Authors: Michael Sullivan,III
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Credit Scores Your Fair Isaacs Corporation (FICO) credit

Chapter 7, Problem 26AYU

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QUESTION:

Credit Scores  Your Fair Isaacs Corporation (FICO) credit score is used to determine your creditworthiness. It is used to help determine whether you qualify for a mortgage or credit and is even used to determine insurance rates. FICO scores have a range of 300 to 850, with a higher score indicating a better credit history. The given data represent the interest rate (in percent) a bank would offer on a 36-month auto loan for various FICO scores.

(a) Which variable do you believe is likely the explanatory variable and which is the response variable?

(b) Draw a scatter diagram of the data.

(c) Determine the linear correlation coefficient between FICO score and interest rate on a 36-month auto loan.

(d) Does a linear relation exist between the FICO score and interest rate?

Questions & Answers

QUESTION:

Credit Scores  Your Fair Isaacs Corporation (FICO) credit score is used to determine your creditworthiness. It is used to help determine whether you qualify for a mortgage or credit and is even used to determine insurance rates. FICO scores have a range of 300 to 850, with a higher score indicating a better credit history. The given data represent the interest rate (in percent) a bank would offer on a 36-month auto loan for various FICO scores.

(a) Which variable do you believe is likely the explanatory variable and which is the response variable?

(b) Draw a scatter diagram of the data.

(c) Determine the linear correlation coefficient between FICO score and interest rate on a 36-month auto loan.

(d) Does a linear relation exist between the FICO score and interest rate?

ANSWER:

Step 1 of 5

We have,

Credit Score

Interest Rate (percent)

545

18.982

595

17.967

640

12.218

675

8.612

705

6.68

750

5.15

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