The Bank of Blue Sea uses the following credit scoring system to evaluate consumer credit loan of more than $5,000.

Criterion Points

Applicants length of employment in his/her present job

More than three years 10

One to three years 6

Less than one year 2

Applicants length of time at the current address

More than three years 10

One to three years 5

Less than one year 3

Applicants current residence

Home owner 10

Renting a unit/home 6

Living with a friend/relative 3

Veda report

Excellent 10

Average 5

Below average/no record 3

Deposit account with a bank

Yes 5

No 2

Active credit cards

One card 5

Two cards 3

More than three cards 2

Applicant's Net assets (Assets - Liabilities)

Between 200,001 and 1,000,000 10

Up to 200,000 5

Applicant has more liabilities than assets -5

Borrowings applied for

500,000 or less 10

500,001 to 1,000,000 5

More than 1,000,000 0

Applicant's margin towards the loan

0 to 10% 0

11 to 20% 5

More than 20 % 10

Applicant's Income range ($ p.a.)

Less than 50,000 2

Between 50,000 and 100,000 5

More than 100,000 10

The cut off score set by the bank for accepting credit application is 50 points.

Karl Stafanovic has asked for a loan of $35000 because he wants to purchase a new car worth $50,000. The balance will be met by Karl from his own resources. The loan is intended to cover the cost of car, accessories, registration and other expenses relating to the car. Karl has an average credit rating, has been in current job for about two years, has been an owneroccupier of his current house for the past two years, and has a telephone and Saver account with the bank. He has a borrowing of $500,000 outstanding against the house value of $1,000,000. His annual income is $150,000 p.a. He has only one credit card with zero balance.

Give your decision on the acceptance of credit application of Karl citing your reasons. Show all workings. Show all the steps on points selection. Marks will be awarded for each step.