Why is credit worthiness important?

So you’re thinking of buying a house or car well you better check on your creditworthiness then. As most likely when purchasing these big money items, unless you have a stash of money lying around you may need to lend to buy them. 

Strong creditworthiness is the backbone of any individual’s financial health because your creditworthiness is used by most lenders to determine whether to do business with you. 

But your creditworthiness it’s so important that it can go beyond simply getting a car. Because a stellar creditworthiness rating can be of an immense reward for faster credit card approval or that home loan with low rates.  

And a driver’s credit score, for instance, is also a major factor in pricing car insurance as well. Therefore good creditworthiness can be a huge confidence booster for you especially when applying for those loans and other credit like starting your own business. 

Also in the business arena a business needs to know with whom they’re doing business with. This protects the company because extending credit to the wrong customer or extending the wrong amount of credit exposes a business to unnecessary risk. 

If the customer isn’t able to repay their debt on time, this leads to late payment. In turn, suffering from late payment can affect a business’s working capital and create cash flow problems.  

This is particularly true if late payment leads to bad debt, which may need to be written off. Cash flow problems can also have a knock-on effect across the supply chain, threatening other business’ stability too.