Creditworthiness - Financial definition

In finance, creditworthiness assesses the likelihood that a borrower will fulfill their financial obligations, typically measured through credit scores, income stability, debt-to-income ratio, and past credit history. Lenders, such as banks and financial institutions, evaluate creditworthiness to determine the risk associated with lending money and set interest rates accordingly.

A higher creditworthiness often leads to more favorable loan terms and access to higher loan amounts, while lower creditworthiness may result in higher interest rates or loan denials. Creditworthiness plays a crucial role in various financial transactions, including loans, mortgages, credit cards, and business financing, shaping individuals' and businesses' access to credit and overall financial health.