What does creditworthiness mean?

Creditworthiness refers to the outcome of an evaluation that lenders pursue to determine a borrower's capabilities of honoring his or her debt obligations.

Creditworthiness is often determined by an institution's credit rating system. Five C's of credit are often considered: character, capacity, capital, collateral, and conditions. Character refers to a borrower's credit history, and capacity refers to the borrower's ability to pay based on current cash flow. Capital considers the capital, such as a down payment, that the borrower is willing to give initially towards the debt. Collateral refers to any assets associated with the debt, and conditions refer to how the money will be used and the overall conditions of the loan, like the interest rates and type of loan.

In terms of creditworthiness based on various rating systems, the higher one's score, the better. Lenders want to feel secure that the borrower will not default.