Your creditworthiness is a measure of how good or bad a risk you might be to a potential lender like a bank or credit card issuer. Lenders may use a number of criteria to evaluate your creditworthiness, with special emphasis on your debt-to-income ratio, or DIR (D-I-R), and your payment history. Your DIR takes into account all your debts, such as home mortgages, car payments, and student loans, plus all you could owe if all your credit cards were charged to their limit. It also totals all sources of income. Most lenders look for a DIR between 20 and 35 percent. Very high or very low ratios may cause you to be denied credit. A record that shows repeated late or missed payments can also reflect poorly. Often, companies use a mathematical system to determine whether an individual is likely to pay his or her bills. Known as a FICO (FYE-coh) score, it awards points for up to 33 elements, including factors related to your DIR; payment history; number, type, and age of credit accounts; and how often you've applied for credit. A FICO score of 650 or higher is generally considered good. Situations that can lower your score are having past-due accounts, owing too much, and having no or too many credit accounts.
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