Factors That Affect Credit Worthiness

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Creditworthiness is a valuation performed by lenders that determines the possibility a borrower may default on their debt obligations. And there are various factors that affect your credit worthiness some of these may include. 

  • your credit score  

It’s essential for every person to keep track of their credit score. This is the primary factor that financial institutions use to decide if the person is eligible for an advantageous interest rate.  

The credit score is a number that lenders use to determine the risk of loaning money to a given borrower, the higher the score, the better. Based on the information in your credit file, credit agencies compile these scores, for the system such as the credit bureaus. 

  • Public Records

Things like paying your bills on time can have an effect on your credit worthiness. Your accounts having gone to collections can determine to potential lenders that you might not pay them back.  

Or even any debt settlements, bankruptcies, foreclosures, law suits, wage garnishments or public judgments against you. These items of public record constitute the most dangerous marks to have on your credit report from a lender’s perspective. 

  • Amounts Owed

So you might make all your payments on time. Don’t assume you have to have a R0 balance on your accounts to score high marks.  

Less is better, but owing a little bit can be better than owing nothing at all. Lenders want to see that if you borrow money, you’re responsible and financially stable enough to pay it back. 

  • Length of Credit History

Payment history or credit history depicts how a person meets debt obligations, which establishes creditworthiness or the financial character of a person. Your credit score also takes into account how long you’ve been using credit, such as your repayment history.  

This can include the amount of years you’ve had obligations, to the average age of all your accounts as well as to the oldest account you have. 

A long credit history is helpful if it’s not marred by late payments and other negative items. But a short history can be fine, too, as long as you’ve made your payments on time and don’t owe too much.

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