Housing Counselor Certification (HUD) Practice Exam

What factor is often considered when determining a potential buyer's creditworthiness?

1. Marital status

2. Employment history

3. Payment history on existing debts

4. Number of credit inquiries

The correct answer is: Payment history on existing debts

Payment history on existing debts is a crucial factor in assessing a potential buyer’s creditworthiness. This component of a credit report details how consistently the individual has made payments on credit accounts, including credit cards, mortgages, and other loans. A strong record of on-time payments indicates reliability to lenders, reflecting the individual's ability to manage debt responsibly. Consequently, those with a robust payment history are generally viewed more favorably and may have better access to financing options and lower interest rates. While other factors like marital status or employment history can provide context about an individual's financial situation, they do not directly reflect credit management. The number of credit inquiries can influence a credit score slightly but is less indicative of an individual’s reliability in repaying debts compared to payment history. This is why payment history stands out as a key element in evaluating creditworthiness.