Creditworthiness is an important factor when considering finance applications. Lending institutions use it, along with numerous factors in order to decide whether or not to grant an applicant credit.
Why is creditworthiness important?
When applying for credit, this measure is used to rate levels of reliability. Individuals and organisations should be able to prove that they can afford to repay debts.
For Tasha, who has a lot of debt to her name, her creditworthiness is at a low level, meaning that she will not be able to qualify for any additional credit, until she lowers the one that she currently has.
Tasha needs to keep in mind that how she has handled her previous debts is a factor taken into account. The more reliable she is, the better her chances are for approval. This could also affect the interest rates for which she qualifies.
Having a credit score and therefore a level of creditworthiness means that there is a record kept by credit bureaus detailing how they have dealt with amounts that they owe.
For Stan, who is applying for a mortgage, he needs to know why this is important long before he applies. This way, he can work out how to improve his chances of approval.
Firstly, he needs to know that this measure gives credit providers a reliable indicator of the likelihood of timeous debt repayment.
Stan should ideally work on keeping up the good credit score he has. This makes it much easier should he need to apply for any more finance. He could go about this by paying his debts on time, paying more than the monthly minimum that is required and avoiding accumulating too much debt.
By considering creditworthiness important, you or your business are more likely to find ways of improving current credit standing. Stan needs to know that for him to qualify for a home loan he needs to present an excellent credit score and should be able to maintain it throughout the loan period.