Credit worthiness is the extent to which an individual is considered to be suitable to receive a loan from financial institutes. The lenders go through a process of finding information that is relevant to the person in question and uses it to determine their funding.
Your credit history affects your credit worthiness. How you handled your previous debts and the time you took to pay off debts is very important. The fact that you have been entrusted with debt before makes you eligible for debt in future. Lenders don’t pay attention to borrowers who have missed payments, who have paid their debts late and been irresponsible with their funds.
Ability to repay debt
Your capacity also determines your credit worthiness. Lenders compare the income against your current debt. They look at the borrower monthly debt and divide that by the borrower’s gross monthly income. It is therefore imperative that you pay off most debts in order to qualify for new funds. They also look at the income that you receive per month and see determine if it will be enough to sustain you and still pay your other debts.
This can also assist borrowers to secure loans. Collateral can be property or any belongings that can be used in the event that you are unable to pay off your debt. Borrowers with collateral are most likely to receive a low interest on their loans. They are also likely to receive favorable terms than those without collateral.
How the borrower intends to use the money
If someone wants to borrow money for their house or to buy a new car they are likely to receive the funds than someone who does not have a reason for those funds. Lenders also look at other external conditions such as the economic factors and inflation.