Credit Flow

• The economy is greatly affected by the credit flow that's made available by banks and other financial institutions at any time. During economic downturns, many lenders will cut back on the amount of credit that they provide to businesses. If lenders have made too many bad loans that borrowers fail to repay, this can be a cause of an economic downturn by itself, as the lending institutions have less money available to lend to new applicants.
  
  

Credit Score

• In order to evaluate who's a good risk for any sort of credit, lenders rely on credit agencies that collect data on the credit history of all borrowers. In the United States, a widely used standard has been established for measuring credit worthiness, call a FICO score, which stands for Fair Isaac Corporation, the company that devised the metric. The scale has a scoring range of 300 to 850, with the higher number being optimal. A credit score is based on a wide number of variables, including resources and capacity to repay a loan, as well as on past history with repaying debt.
  
  

Innovation

• As credit has become more important in the world's economy, the methods that banks use to evaluate their lending have become more sophisticated. Using statistical models and other means, lenders have sought to find new ways to earn a profit off of providing credit. Much criticism has been leveled against newer lending vehicles, such as sub-prime mortgages, that were blamed for at least partially causing the world financial crisis in 2008. Critics argue that with newer lending methods it is too difficult to evaluate a bad risk from a good one.
  
  

Regulation

• The more risk that a business takes in any venture, the more it will stand to gain in profits. Theoretically, under one school of economic thought, the more credit that's provided to the economy, the more growth is possible. Regulators have sought to find a middle ground between policies could inadvertently restrict growth, and rules that prevent the economy from becoming over-leveraged with too much debt. This has proven to be difficult as there are always political pressures to take regulation too far in one direction or the other.