The term “creditworthiness” refers to an individual’s eligibility to borrow money. Lenders assess the creditworthiness of anyone who applies for a loan, a mortgage or a credit card to determine whether or not they represent a good lending risk. Ever since the nationwide financial crisis, most banks are seeking only the most creditworthy consumers to avail of the opportunity to borrow money.
There are three major credit bureaus: the Trans Union, Experian and Equifax. These bureaus are used by banks to request someone’s credit report during the process of evaluating their creditworthiness. Your annual income, the length of time you have resided at your current address, the amount and specific type of your assets, your bank account balances including checking and savings, whether or not you pay your bills in timely manner, how long you have been employed with your current employer and other determining factors play into a creditor’s decision-making process when they are considering offering you a loan or line of credit.
While all creditors have different criteria, in general, should any of the following appear on an applicant’s credit report, they would be considered a poor credit risk and likely not be availed of the best interest rate, if they are even offered a loan at all.
Habitual non-payment of bills or paying bills late are big “no-nos,” so to speak.
According to FICO, a credit scoring company, an individual’s payment history is the greatest influence on their credit score, accounting for 35% of their number.
Likewise, it does not look good if your report shows that you have had any accounts turned over to a collection agency. This typically indicates that you have defaulted on your bill long enough for your creditor to deem the amount an “uncollectible,” write it off their books, and turn it over to a third-party collection agency to attempt to recoup the amount owed.
Should any one of these be present on your credit report alone or in combination: repossessions, liens, legal judgments, and bankruptcies, it will have long-term negative consequences on your ability to borrow money or open a credit card account.
If you find yourself to be in a bad financial situation for whatever reason, the best thing to do is contact your creditor as soon as possible and explain your situation.
Most, in the interest of collecting what is owed to them, will be willing to work out a different payment schedule in order to prevent you from defaulting.