​What is creditworthiness and why does it matter?

What is creditworthiness?

It might be a bit of a mouthful, but the concept of creditworthiness is simple enough to understand.

The term refers to a person or company considered suitable to receive credit – mainly due to being reliable in paying money back in the past, as well as having enough funds to stay afloat if things go south.

There are ways to enhance your creditworthiness. But for now, it’s best to wrap your head around the basics.

What is creditworthiness and why does it matter

What do they look at?

When you apply for credit, banks look at lots of different factors to determine your creditworthiness such as your income, assets, spending, and debts. And, they’ll usually look at the following things.

Your credit file

This is your history of credit applications and interactions. You can ask for a copy of this file to see where you stand – and to ensure your information’s accurate.

Your income

Unless you plan to buy a super yacht or 60-roomed Sydney Harbour citadel, they’re not expecting you to be super-rich. Instead, they looking for proof of steady, regular income—each week, each month.

Your savings

Do you put aside a bit from your pay packet each month? Even a modest bank account with a short savings history suggests you’re a reliable character.

Your assets

Retirees, for example, may not have high incomes, but will have significant assets in reserve. So long as these are reasonably liquid, they’ll boost your creditworthiness.

Your debts

It may seem odd that debt can make you more (and not less) creditworthy. However, banks like to see evidence of your ability to manage debt and pay things down.

That said, it’s a question of balance – and it’s important your debts are well within your capacity to handle.

Why does creditworthiness matter?

It matters to you

Used responsibly, credit can get you to where you want to be, quicker than you might think.

Don’t take on debts you can’t afford, to become a slave to your own mortgage, or slide into financial distress.

Talk to us today if you need more information.

Source: NAB

Reproduced with permission of National Australia Bank (‘NAB’). This article was originally published at https://www.nab.com.au/personal/life-moments/manage-money/money-basics/creditworthiness.

National Australia Bank Limited. ABN 12 004 044 937 AFSL and Australian Credit Licence 230686. The information contained in this article is intended to be of a general nature only. Any advice contained in this article has been prepared without taking into account your objectives, financial situation or needs. Before acting on any advice on this website, NAB recommends that you consider whether it is appropriate for your circumstances.

© 2023 National Australia Bank Limited (“NAB”). All rights reserved.

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CFP® Dip FP
Authorised Representative 298494
Interprac Financial Planning Pty Ltd 

Darryl Jopling

Senior Adviser

I have worked in the financial services industry since 1982 and as a Financial Adviser since 1999.

I have worked for large Financial Planning businesses, Membership based organisations and looked after the financial planning needs of clients within an Accounting Practice before starting my own business.

I am married, have 4 older children and a grandson and I am keen golfer with mixed results like many .

I have been through many of the strategies I talk with clients about myself and with my family.

I have been through the journey of seeing my parents move into Aged care and negotiated the difficulties and pitfalls of understanding the system for them and this gives me an excellent insight into what is required to assist families at this difficult time.

In a previous roll I used to run retirement seminars looking at Centrelink and Retirement Incomes and how to make these work for you. I have helped many of my clients with Aged Care advice when their parents needed to move into Nursing Homes. For many clients I assist them with superannuation, building wealth and protecting their loved ones with insurance.

I am supported by his, Licensee, Interprac Financial Planning’s in-house resources and ongoing technical, systems and training.

I am committed to understanding your needs and identifying strategies and products to help you achieve your goals.

My guiding principle as an Adviser is to design plans which help to provide my clients with clarity of purpose and the opportunity to build a solid financial foundation.
I will take the time to listen, explain things clearly and keep you informed throughout the advice process.

My experience is complemented by professional qualifications including:

  • Certified Financial PlannerTM Professional
  • Diploma of Financial Planning

At Choice Financial Advice we work with you along the way on life’s journey.

Whether you are getting married, starting a family, embarking on the trip of a lifetime, planning to enjoy your years after work or assisting elderly parents with Aged Care and Nursing Home placements, we can help.