Final answer:
A consumer's creditworthiness is determined by their credit history, income, debt-to-income ratio, employment history, and assets.
Step-by-step explanation:
A consumer's creditworthiness is determined by several major components:
- Credit history: Lenders consider a consumer's past borrowing behavior, including whether they have paid their loans on time or have any defaulted loans.
- Income: The amount and stability of a consumer's income are important factors in determining creditworthiness. Lenders want to ensure that borrowers have the ability to repay their loans.
- Debt-to-income ratio: This ratio compares a consumer's total debt to their income. Lenders want to see a lower ratio, as it indicates that the consumer has a lower risk of defaulting on their loans.
- Employment history: A stable employment history demonstrates financial stability and the ability to maintain a steady income.
- Assets: Consumers with valuable assets, such as a home or investments, may be considered more creditworthy as they have collateral that can be seized in case of default.