Ever wondered what we look for when we assess your credit card, overdraft or personal loan application? Mostly, we just want to be sure you’re able to comfortably handle these debts. That you’re creditworthy. In this article, we look at the simpler-than-it-sounds concept of creditworthiness: in our second story, we suggest 10 ways you can enhance yours.

Give me the main points

  • Creditworthy individuals are those considered ‘good risks’.
  • They’ll have a track record of managing and repaying debts on time.
  • Their income – and their liquid assets – is enough to cover reversals of fortune.
  • They’ll also have demonstrated an ability to manage debt.

The Oxford Dictionary’s definition of ‘creditworthy’ is simple: "(Of a person or company) considered suitable to receive credit, especially because of being reliable in paying money back in the past." The Collins Dictionary adds ‘earning power’ to the mix. In other words, a creditworthy person is someone who’s paid off their debts in the past, and has enough income (or funds) to stay afloat if things don’t quite go to plan.

What do we look at?

At NAB, we’ll look at your income, your assets, your spending and your debts when you apply for credit. Specifically:

Your credit file

We’ll look at your credit file (your history of credit applications and interactions). You can ask to see a copy of this file to see where you stand (and also to ensure your info's accurate). The credit reporting bodies we use are:

Your income

Unless you plan to buy a super yacht or 60-roomed Sydney Harbour citadel, we’re not expecting you to be super-rich. Instead, we’re 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—and a shortish savings history—suggests you’re a reliable character.

Your assets

Retired people, for instance, may not have high incomes but 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, but banks like to see evidence of your ability to manage debt (and pay things down). It’s a question of balance, though—it’s important your debts are well within your capacity to handle.

Why does creditworthiness matter?

It matters to you

We don’t want our customers to take on debts they can’t afford. We don’t want you to become slaves to your mortgage; we don’t want you to slide into financial distress.

We take our ‘Fair Value’ ethos seriously: we want to help our customers achieve their financial goals and make their lives better, not worse. Used responsibly, credit can help you get to a place more quickly than you would otherwise. But we don’t want our customers to borrow more than they can afford.

It matters to us

We take our role as responsible lenders very seriously. Lending recklessly is not good for us, or for our shareholders. It’s not good for our community and, ultimately, it’d let you down, too.

That’s why we place such importance on creditworthiness. That’s why it matters.

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