What Is Creditworthiness?
Credit worthiness is how a lender determines that you will default on your debt obligations, or how worthy you are to receive new credit. Your credit worthiness is what creditors look at before they approve any new credit to you.
Credit worthiness is determined by several factors including your repayment history and credit score. Some lending institutions also consider available assets and the number of liabilities you have when they determine the probability of default.
Your credit worthiness tells a creditor just how suitable you are for that loan or credit card application you filled out. The decision the company makes is based on how you’ve dealt with credit in the past. In order to do this, they look at several different factors: your overall credit report, credit score, and payment history.
Your credit report outlines how much debt you carry, the high balances, the credit limits, and the current balance of each account. It will also flag any important information for the potential lender including whether you’ve had any past due amounts, any defaults, bankruptcies, and collection items.
Your creditworthiness is also measured by your credit score, which measures you on a numerical scale based on your credit report. A high credit score means your creditworthiness is high. Conversely, low creditworthiness stems from a lower credit score.
Payment history also plays a key role in determining your credit worthiness. Lenders don’t generally extend credit to someone whose history demonstrates late payments, missed payments, and overall financial irresponsibility. Also, inquiries can be a detriment to higher scores …
Your credit worthiness is important because it will determine whether you get that car loan or that new credit card. But that’s not all. The more creditworthy you are, the better it is for you in the long run because it normally means better interest rates, fewer fees, and better terms and conditions on a credit card or loan, which means more money in your pocket. It also affects employment eligibility, insurance premiums, business funding, and professional certifications or licenses.
Credit worthiness is difficult to restore once it is lost. You’ll have to work hard to restore and retain it. Follow the tips above to keep yourself in check, or contact MSC Legacy Corp to allow them to take the bull by the horns for you.