Your creditworthiness is basically your credit history and credit score. Credit scores are used by most lenders. They’re important to have if you ever decide to purchase a home, a car, or even open your own business. Potential employers or landlords, as well as cellphone and utility companies, may look at your score to determine whether to do business with you.
When you’re out there in the world spending on this and the other on credit you’re actually building your credit history when swiping on your credit or account cards. Those financial transactions are being kept record of by potential lenders who use it to assess how you manage financial responsibilities. Kind of like “Big Brother” watching, the big brother of the credit world.
This is how your credit history is determined by lenders and your credit history then determines your ability to obtain credit. This is because lenders don’t favour borrowers with zero credit history. No previous history of credit means no assurance that you’re a responsible borrower, and this puts you in the high-risk category when you apply for a loan.
Lenders want to see a proven track record of responsible borrowing and repayment behaviour. Lenders access your credit history through a credit report, which documents every line of credit you’ve had for potential. Because down the line you may want to do business with these lenders your credit history determines the terms of credit granted, such as the interest rate you’ll pay.