Creditworthiness

What is 'Creditworthiness'

An assessment of the likelihood that a borrower will default on his or her debt obligations. It is based upon factors, such as his/her history of repayment and  credit score. Lending institutions also consider the availability of assets and extent of liabilities to determine the probability of default.

BREAKING DOWN 'Creditworthiness'

Several firms have developed rating systems to determine an individual or company's creditworthiness. It is important for each person to keep track of their credit score because this is the main metric used by institutions when determining if the individual is worthy of a favorable rate.

To learn more about creditworthiness, check out What's a better way to borrow money: overdraft or credit cards?

RELATED TERMS
  1. Credit Score

    A statistically derived numeric expression of a person's creditworthiness ...
  2. Credit Analyst

    A financial professional who has expertise in evaluating the ...
  3. Credit Agency

    A for-profit company that collects information about individuals' ...
  4. Credit Rating

    An assessment of the creditworthiness of a borrower in general ...
  5. Default Probability

    The degree of likelihood that the borrower of a loan or debt ...
  6. Credit Default Contract

    Security with a risk level and pricing based on the risk of credit ...
Related Articles
  1. Credit & Loans

    What Do Credit Score Ranges Mean?

    Take a closer look at what credit scores in each range mean for your financial future.
  2. Credit & Loans

    The 5 Biggest Factors That Affect Your Credit

    With possible scores ranging from 300 to 850, credit scores reveal someone’s history for paying bills and being responsible.
  3. Credit & Loans

    Understanding Credit Risk

    Credit risk arises whenever a borrower is expecting to use future cash flows to pay a current debt.
  4. Credit & Loans

    5 Keys To Unlocking A Better Credit Score

    Follow these tips and techniques to rebuild a ruined credit rating.
  5. Economics

    Understanding Default Risk

    Default risk is the chance that companies or individuals will be unable to pay their debts.
  6. Credit & Loans

    The 5 Biggest Factors That Affect Your Credit

    Credit companies rely on these factors to determine whether to lend to you and at what rate.
  7. Credit & Loans

    Your Credit Score: More Important Than You Know

    Credit scores affect key aspects of your personal and professional life. Knowing your score and managing your credit input can make a big difference.
  8. Credit & Loans

    How Bad Is My Credit Score?

    You've seen the number, but what does it mean? Here's how to assess your credit score and get to a better place if needed.
  9. Credit & Loans

    Millennials: Prevent a Bad Credit Score

    Here are five ways to help prevent getting a bad credit score that could affect future loan, credit card or mortgage approvals.
  10. Credit & Loans

    Credit And Debt Management: Credit Reports And Scores

    by Cathy ParetoIt's funny how things come to define us as people. Sadly, our credit score is one of those things. A credit score can either be a scarlet letter or one-way pass to easy money; ...
RELATED FAQS
  1. Why do high profiting sales mitigate credit risk?

    Learn more about credit risk in loaning to individuals and businesses. Understand how credit risk is determined and the impact ... Read Answer >>
  2. What's the difference between a credit rating and a credit score?

    Learn about the differences between credit ratings and credit scores, and review how these expressions of creditworthiness ... Read Answer >>
  3. What's the difference between credit score and credit history?

    Check out the differences between credit score and credit history, and learn how your credit history is used to create your ... Read Answer >>
  4. What is the difference between the Five Cs of Credit and credit rating?

    Learn the difference between the five C's of credit and credit rating and how they are used together by banks and finance ... Read Answer >>
  5. Does marrying someone with bad credit affect my credit score?

    A credit rating is an assessment of an individual's creditworthiness. This evaluation is based on an individual's history ... Read Answer >>
  6. What is the most important "C" in the Five Cs of Credit?

    Learn how the five C's of credit affect new credit application decisions, and understand how a lender analyzes each aspect ... Read Answer >>
Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  3. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  4. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  5. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  6. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
Trading Center