How to Determine Credit-Worthiness

Credit worthiness is defined as being an assessment of the likelihood that a borrower will default on their obligations. The company lending you money wants to know how likely they are to receive it back from you before they lend you money. Even if a company decides to advance you credit, the rate of interest will be determined by your credit worthiness. You need to know the factors companies look at when determining your credit rating and score, or which factors to consider when advancing credit to somebody else.

Instructions

Calculating Credit Worthiness

1

Obtain credit reports from the three main agencies: Equifax, Experien and Transunion. As noted below, your report is provided free of charge once every 12 months. If you are looking at providing credit to others, their permission must be sought to obtain their reports, and the agencies will charge for providing it.

2

Check the credit score. Generally, anything below about 720 (the exact figure varies) is below average and might limit the credit that would be made available.

3

Look at the credit profile and performance in the main areas that determine the credit score. These are: payment history, which is how often you have made late payments or missed payments altogether; and credit utilization, defined as how much of the total credit lines available are being utilized. These two factors make up about two thirds of the weighting on the credit score.

4

Look at the other factors the credit rating agencies check ---- length of credit history, how often one applies for credit, types of credit utilized and whether there are any court judgments, tax liens or something similar.