Which factor of creditworthiness does a client's payment history affect?

Payment history is a fundamental aspect of assessing an individual's creditworthiness and is primarily associated with the concept of character. Character refers to the borrower's reliability and trustworthiness when it comes to repaying debts. Lenders evaluate this by examining how consistently a client has made payments on time in the past. A strong payment history, which indicates that a borrower meets their financial obligations promptly, positively reflects their character, while a poor payment history can raise concerns about their future payment reliability.

Other factors, such as capacity, collateral, and capital, focus on different elements of a borrower's financial situation. Capacity refers to the ability to repay the loan based on income and existing debts, collateral pertains to assets pledged against a loan in case of default, and capital reflects the borrower's net worth or assets. While all these attributes are important in the lending process, it is the client's payment history that is directly tied to character.