What requirement exists for lenders when assessing a borrower's creditworthiness?

When assessing a borrower's creditworthiness, lenders are required to take the borrower's financial history into account. This requirement ensures that lenders have a comprehensive understanding of the borrower's past financial behavior, including income, debt levels, repayment history, and any previous delinquencies. Financial history provides critical insights into a borrower’s ability and likelihood to repay a loan.

By evaluating this wider financial context, lenders can better gauge the risk associated with lending to that individual. It allows them to make informed decisions based on the borrower’s patterns in managing credit and fulfilling financial obligations. This holistic approach is integral to responsible lending practices and aligns with regulations that protect both borrowers and lenders in the financial marketplace.