What does "credit analysis" involve?

Credit analysis involves evaluating a borrower’s creditworthiness, which is crucial for lenders to assess the risk they take on when extending credit. This process includes examining a borrower's credit history, income, debt levels, and overall financial condition. By conducting credit analysis, lenders can determine whether the borrower is likely to repay their loans on time, which ultimately helps in making informed lending decisions. Understanding a borrower’s ability to repay is essential not only for the lender's risk management but also for maintaining the overall health of financial markets.