What do lenders use to determine the consumer creditworthiness?

Lenders primarily assess consumer creditworthiness through credit scores and credit histories because these metrics provide a comprehensive view of an individual's financial behavior and reliability.

Credit scores are numerical representations that summarize a borrower's creditworthiness based on their credit history, which includes factors like payment history, amount of debt, length of credit history, new credit accounts, and types of credit used. A high credit score suggests a lower risk of default, while a lower score indicates potential issues with managing debt.

In addition to the score, lenders examine the credit history, which details an individual's past borrowing and repayment behavior. This information can include how consistently a person pays their bills, if they have any bankruptcies or foreclosures, and how much debt they currently carry. Together, these details help lenders make informed decisions about extending credit or loans to prospective borrowers.

While income levels, debt-to-income ratios, and employment history are important factors considered in the loan approval process, they do not provide a complete picture of an individual’s credit behavior as effectively as credit scores and histories do.