Which of the following is the most important factor for a lender in determining creditworthiness?

Which of the following is the most important factor for a lender in determining creditworthiness?

• A. Applicant's age
• B. Applicant's source of income
• C. Applicant's credit history
• D. Applicant's gender

Answer: (C)

The most important factor for a lender in determining creditworthiness is the applicant's credit history. Lenders use credit history to assess how reliably a borrower has repaid debts in the past, which is a strong indicator of their likelihood to repay a loan in the future. A good credit history reflects an individual's financial behavior, including on-time payments, the total amount of debt, and the mix of credit types previously utilized. This information helps lenders gauge risk and make informed decisions about extending credit. While an applicant's source of income is also relevant, as it indicates the ability to make payments moving forward, it does not provide the retrospective insight that credit history does. Factors like age and gender are generally not used as indicators of creditworthiness by lenders, as they do not directly correlate with an individual’s financial responsibility or reliability in repaying debts.

The most important factor for a lender in determining creditworthiness is the applicant's credit history. Lenders use credit history to assess how reliably a borrower has repaid debts in the past, which is a strong indicator of their likelihood to repay a loan in the future. A good credit history reflects an individual's financial behavior, including on-time payments, the total amount of debt, and the mix of credit types previously utilized. This information helps lenders gauge risk and make informed decisions about extending credit.

While an applicant's source of income is also relevant, as it indicates the ability to make payments moving forward, it does not provide the retrospective insight that credit history does. Factors like age and gender are generally not used as indicators of creditworthiness by lenders, as they do not directly correlate with an individual’s financial responsibility or reliability in repaying debts.