What does 'creditworthiness' assess?

Creditworthiness primarily assesses the likelihood that a borrower will repay a loan. It is a measure used by lenders to evaluate the potential risk of lending money to a borrower. This assessment is determined through various factors, including credit history, income, outstanding debts, and overall financial behavior. A borrower deemed creditworthy is perceived as reliable and capable of fulfilling their repayment obligations, which directly influences the lending decision and the terms of the loan offered.

In terms of context, while the total assets a borrower has and the age of their credit history can provide some insight into financial stability and past behavior, they do not fully capture the borrower's ability or likelihood to repay debts. Similarly, although the interest rate offered relates to creditworthiness, it is an outcome of that assessment rather than a factor that defines creditworthiness itself.