Creditworthiness and classification of borrowers: analysis of concepts

Abstract

Purpose: to reveal the essence of the economic categories of solvency, creditworthiness, credit risk and default. Discussion: we implemented grouping of existing regulatory and legislative sources, as well as domestic and foreign points of view on the definition of the concept solvency, credit-rate risk, and default. In addition, we identified its strengths and weaknesses sides of analyzed approaches. Results: in order to clarify the economic nature of credit risk we offered the classification of borrowers. We suppose it could clearly identify the of credit risk value in the process of analyzing the creditworthiness of the borrower. Eventually it will provide more accurately assigning a category of loans and generate the compliance of corresponding quantities of allowances for losses.