What is Credit Worthiness?

Mary McMahon

Credit worthiness, also seen as creditworthiness, is an assessment of a prospective borrower to determine the likelihood that the borrower will default on debts. A number of things are taken into a account when evaluating borrowers to find out how credit worthy they are. Borrowers can increase their chances of getting loans at favorable terms by familiarizing themselves with the criteria that come into play in credit worthiness evaluations and monitoring their credit reports for signs of adverse entries that might impact their credit ratings.

Overdue or delinquent bill payments can negatively affect a person's credit worthiness.
Overdue or delinquent bill payments can negatively affect a person's credit worthiness.

There are two components to credit worthiness. One is a borrower's current and projected ability to repay a loan or offer of credit. This can be determined by looking at things like income, other debts the borrower is carrying, expenses, and future employment opportunities. Lenders can use this information to find out how much they could safely lend to set a limit on loans and credit.

Lenders will evaluate a person's credit report to determine credit worthiness.
Lenders will evaluate a person's credit report to determine credit worthiness.

Another issue is the borrower's inclination to repay debts. This is a bit more complicated because there is no convenient formula for finding out whether or not a borrower will stop paying off a debt on a whim. Some warning signs can be repeated delinquencies on other debts, sluggish repayment of loans, and other entries in a borrower's credit history. Essentially, the lender tries to characterize the borrower in order to see whether or not the borrower will take the loan seriously.

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One tool lenders can use to quickly assess credit worthiness is to consult a credit rating agency. These agencies monitor consumers and keep track of their financial activities to generate a credit score. The score is a reflection of someone's credit history, including number of accounts open, total debt, types of accounts, and history of default or delinquency. This rating can be used as a rule of thumb by a lender looking to quickly eliminate poor candidates for loans.

People can improve their credit worthiness by keeping their debts to a manageable percentage of their income and paying bills on time. It's important to be aware that the older a delinquency is, the less weight it is given. Likewise, the shorter a delinquency is, the less serious it is. Credit agencies recognize that people may have a rocky credit record at some point and then work to clean it up. This is rewarded with a higher credit score for people who are clearly trying to keep their records in order after previous mistakes.

A consumer's current and future prospects for repaying credit debt go into the assessment of credit worthiness.
A consumer's current and future prospects for repaying credit debt go into the assessment of credit worthiness.

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Discussion Comments


Credit worthiness is really important. Everyone should keep a close eye on their credit history. Luckily, you can get a free credit report online from a bunch of different places.

I signed up with a service that allows me to view my credit score and any changes in my credit for free. The site also gives a lot of good suggestions for improving your credit. I know there are a lot of paid credit reporting services out there, but I think the free ones are just as good.


@indemnifyme - That's unfortunate about your credit. I know most creditors are even stricter than they used to be, so if your credit isn't excellent, it's hard to get any kind of credit or a loan.

A friend of mine just bought a house, and she went through the wringer filling out forms and providing documentation. They wanted a lot of information about her credit, employment history, etc.

All of my friends that bought houses before the recession had a much easier time. I'm sure everyone remember those "no-doc loans!" You could get a loan no matter what your credit report scores were!


Sadly, I am the opposite of credit worthy. My credit report scores are horrible! I worked my way through college, and I got myself into some credit card debt while I was in school. Back when I was in college, they were pretty much giving credit cards out like it was nothing, so they were really easy to get.

Anyway, after I graduated I wasn't making a lot of money. I tried to get my creditors to work with me by reducing my interest rates, but no one was willing to help. Finally I just said to heck with it and stopped paying at all. I ended up settling a lot of that debt later on, but my credit really took a hit.

Unfortunately, now I pretty much have no access credit. I know having credit affects your credit score positively. But no one will give me a credit card. I've thought about using one of those secured credit cards to build my credit history back up, but I can't seem to scare up the money for a security deposit!


@ElizaBennett - I don't think it's necessary. Credit reports and scores do come mostly from borrowing, but there are other ways to establish creditworthiness without taking out a credit card during school. Doing that is pretty dangerous. The credit limit can be raised over and over again and many college students quickly get in over their heads.

For instance, your niece could get a job and try to maintain it. Having a steady employment history is one thing that would help her get an apartment. Another is having a long account history at a bank.

And if she will be taking out any student loans (which she shouldn't, but I know not many people agree with me) in her own name, that will be more than enough to get a credit history started. She does not need a credit card! On the other hand, if she's employed at all, her parents may not be able to keep her from getting one if she's 18.


What does it take to build a credit history? My niece will be starting college soon and she's trying to convince her mother that she needs a credit card so that she can build a credit history and be able to get an apartment later on in school or after she graduates.

Do you really have to borrow in order to build a credit history?

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