PSI Virginia Real Estate Practice Exam

What does credit scoring primarily evaluate?

1. Real estate investment potential

2. Customer service skills

3. Applicant's creditworthiness

4. Market conditions for real estate

The correct answer is: Applicant's creditworthiness

Credit scoring primarily evaluates an applicant's creditworthiness, which is a critical factor in assessing how likely an individual is to repay borrowed money. This evaluation is based on various financial behaviors, such as payment history, amounts owed, length of credit history, types of credit used, and new credit inquiries. Lenders use credit scores to determine the risk of lending to a borrower; a high credit score typically indicates a lower risk for lenders, while a low score suggests a higher risk. Understanding creditworthiness is essential for individuals seeking loans, mortgages, or credit, as it directly impacts the terms and availability of these financial products. The other options do not pertain to the core function of credit scoring. Real estate investment potential involves factors like property values and returns, customer service skills relate to interpersonal abilities rather than credit matters, and market conditions involve broader economic factors, rather than individual credit assessments. Thus, focusing on creditworthiness holistically encapsulates the essence of what credit scoring aims to evaluate.