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What are the major components that make up a consumer's creditworthiness?

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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.

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