Credit Risk Vs Credit Worthiness

Credit Risk Vs Credit Worthiness

An additional component of your credit score is your credit worthiness. This is a data point that predicts the likeliness that you will pay your bills on time or fall behind in payments. You won't see this number since its part of a credit-reporting bureau's secret, credit-scoring model, but this is important to lenders who make the assessment of whether to loan you the money. Like it or not, it is an indication of your level of risk to a lender: "What kind of track record does this person have in paying loans on time?"

Another thing to understand is that the relationship between credit score and credit risk is dynamic and changes over time. So the risk associated with a 700 score last year is not the same as the risk with a credit score of 700 this year. And it's risk that the lender fundamentally cares about, not the score.

Also, even though your credit score and credit worthiness might be stable, conditions beyond your control — market conditions, a bad recession — could affect everyone's credit worthiness, not just yours. This is certainly true today in our financial crisis that has affected major aspects of our economy — namely, jobs and housing. So, that fabulous credit score that got you loans in the past may have changed as the "bar" for a good score shifts upwards and out of reach as lenders pull in and loan less.

Ron Cooks - Texas Realtor
The Real Estate Marketplace

Specializing in Areas: Killeen, Harker Heights, Temple, Copperas Cove, Belton, Nolanville

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Phone: 254-702-0064
Dated: September 29th 2014
Views: 852
About Ron: I’m a retired Army Warrant Officer that served our nation for 25 years. I was born and reared in ...

1 Response

  1. Darline

    Wow, wouldn't this information deter some people who want to buy a home but have credit issues?


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