In our paper, we focus on the credit risk quantification methodology. We demonstrate that the current regulatory standards for credit risk management are at least not perfect. Generalizing the well-known KMV model, standing behind Basel II, we build a model of a loan portfolio involving a dynamics of the common factor, influencing the borrowers’ assets, which we allow to be non-normal. We show how the parameters of our model may be estimated by means of past mortgage delinquency rates. We give statistical evidence that the non-normal model is much more suitable than the one which assumes the normal distribution of risk factors. We point out in what way the assumption that risk factors follow a normal distribution can be dangerous. Especially during volatile periods comparable to the current crisis, the normal-distribution-based methodology can underestimate the impact of changes in tail losses caused by underlying risk factors.