Guidelines on Creditworthiness Assessment

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Creditworthiness assessment is vital for lending institutions. It provides an indicator of how well borrowers have handled their credit agreements. They can use this information to gauge the level of risk that is associated with particular individuals or organisations.

Lending criteria is often informed by customer affordability and creditworthiness.

For Liz, who is looking to buy herself a new car, she needs to know how creditworthiness is judged.

Before applying for finance, she needs to be clear on her level of creditworthiness, which is based on her credit behaviour. She needs to implement changes to her behaviour in order to have a positive effect on her score. By paying her debts off on time and even paying more than the minimum required, she could improve her chances significantly.

Credit scores are three digit numbers. The higher the score, the more “creditworthy” you are considered.

With a high credit score, you are more likely to pay your creditors on time, so maybe considered to be a low risk individual by lending institutions.

The biggest factor affecting creditworthiness is how often you pay your bills on time. This is a major factor involved in creditworthiness assessment process.

Creditworthiness assessment also takes into consideration the amount of debt you’re already carrying, so doing your due diligence in terms of how much debt you have can be quite beneficial. Having a debt-to-income ratio of less than 30% is always advised.

The bigger the debt you’re taking on, the more creditworthy you need to be and your creditworthiness assessment will be more stringent in such a case.

If you are looking to make the most of this process, ensure that you are in good credit standing and that you are consistently finding ways to improve your credit score.

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