Creditworthiness

What is Creditworthiness?

Creditworthiness is an evaluation of a borrower’s ability to repay a loan based on their financial history, credit score, income, and other factors. Lenders use creditworthiness to determine the likelihood of timely repayment and may adjust loan terms, such as interest rates and collateral requirements, accordingly. Higher creditworthiness usually results in better loan conditions and lower interest rates.

Factors Affecting Creditworthiness

• Credit Score: A numerical representation of a person’s credit history.
• Debt-to-Income Ratio: The ratio of a person’s total debt payments to their income.
• Payment History: Record of past payments made on debts and loans.

Related Terms and Concepts

Loan, credit score, collateral, risk assessment.