When an underwriter assesses a loan application, which factor is considered the most important?

In the context of underwriting a loan application, credit is often considered the most important factor because it reflects the borrower's creditworthiness and history of managing debt. The credit score gives lenders vital insight into how likely a borrower is to repay the loan based on their past behavior with credit. A strong credit history, characterized by timely payments and low credit utilization, indicates a lower risk for lenders, which can lead to better loan terms or the approval of the loan itself.

While capacity (the borrower’s ability to repay based on income and current debts) and collateral (assets pledged as security for the loan) are also crucial factors, they generally come into play after assessing the borrower's credit. Even if a borrower has high income or valuable assets, a poor credit history can significantly diminish their chances of obtaining financing. Thus, the emphasis on credit underscores its role as a primary indicator in the underwriting process for assessing the risk associated with lending.