 TITLE: What Is Creditworthiness? CONTENT: What Factors Determine Creditworthiness?\n----------------------------------------\nTo judge your creditworthiness, lenders look for evidence that you pay your bills and that you have a track record of successfully managing and repaying past debts, including loans and credit card debt. This typically comprises a review of your credit history and an evaluation of your ability to cover your loan payments.\nThe credit check typically involves one or both of the following:\n*   **Reviewing your credit report(s)**: Compiled and maintained by the three national credit bureaus (Experian, TransUnion and Equifax), credit reports list all your outstanding debts as well as any accounts you've paid off or closed in the past 10 years. Monthly payments on those accounts are listed as well, noted as paid on time or paid 30, 60 or 90 days late. If any of your accounts have been sent to collections, those will be noted as well, as will vehicle repossessions, property foreclosures and bankruptcies.\n*   **Checking your credit score(s)**: Credit scoring systems such as the FICO® Score☉ and VantageScore® analyze the historical data in your credit report and use it to make a statistical prediction of how likely you are to fail to repay a loan. That prediction is boiled down to a three-digit score, most commonly between 300 and 850 (though other numerical scales are sometimes used), in which a higher score denotes lower risk of loan default. In other words, a higher credit score indicates greater creditworthiness.\nThe assessment of your ability to pay may involve these steps:\n*   **Verifying your income and debt**: Before they offer you a credit card or loan, lenders may seek assurances that you can afford to pay back the money you wish to borrow. The extent to which a lender investigates this may vary depending on the loan type and amount.  \n    Some credit card lenders simply ask how much you earn and only seek verification if your credit score falls below a specific threshold they set at their own discretion. For car loans and personal loans, proof of steady income in the form of a pay stub or tax return may be required. In the case of mortgage loans, federal law requires lenders to examine your income level, monthly debt and housing expenses. These are used to calculate your debt-to-income (DTI) ratio, which helps determine the amount of mortgage loan you qualify for.\n*   **Documenting additional assets or resources**: In addition to, or in lieu of, steady income (if you're retired, for instance), lenders may consider savings, real estate holdings, investments and other financial assets that show you have resources you can draw from to repay a loan. END