What is Creditworthiness?

Creditworthiness is the opinion of a creditor or lender regarding the ability of a person or business to settle its obligations when due. This assessment extends to the expected future financial condition of the person or business. Creditworthiness is based on the credit application, credit references, and financial statements supplied to the party granting credit, as well as a credit report supplied by a third party credit reporting agency, such as TransUnion or Experian. One may also rely upon the prior payment history of the entity under review, as well as one's judgment of the character of the person authorizing payments. Some organizations use credit scoring models to convert this information into a score that is used as the primary basis for a determination of creditworthiness.

How to Improve Your Creditworthiness

You can improve your creditworthiness over time by engaging in such activities as paying bills when due (or early), reducing the overall level of debt, and/or reducing your debt-to-income ratio. Your debt-to-income ratio is calculated as your total monthly debt payments, divided by your gross monthly income.