Lenders must evaluate whether to give a potential borrower a loan based on the prospective borrowers' credit worthiness. The different characteristics of a borrower than lenders that can use include their credit score, current total debt, net income, work history, type of house they reside in, and debt-to-income ratio (Richardson et al., 2017, pg, 401). The borrower's employment length and nature of employment are important factors considered when analyzing the borrower's employment history.
The employment length will inform the lender of the stability of the potential borrower's employment. The employment length is a key factor in predicting the chances of the borrower defaulting the loan ( Polena & Regner, 2018) . Information on the length of employment will inform the lender of the frequency with which the loan applicant has shifted between jobs or sectors. The higher the number of jobs that the borrower has been in over a period of usually 24 months, the riskier it will be to loan the applicant ( Polena & Regner, 2018) . Lenders understand that frequent job switching is generally accompanied by a change in income and shows uncertainty. Therefore, it will be challenging to determine if the borrower can repay a certain amount of money monthly if they are loaned. The longer the borrower's working period in a given company, the higher the borrower's chances of being offered a loan.
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Besides, the borrower's employment history will inform the lender of any employment gaps in the past, relocation due to employment, and involuntary layoff. The number and length of employment gaps will help the lender determine the borrower's overall employment stability, which is an important factor in determining the borrower's ability to repay ( Polena & Regner, 2018) . Unexplained relocations in the employment history will help the lender predict the chances of the borrower defaulting. Also, relocation information informs the lender on the ease and chances of collecting the loan if the borrower defaults ( Polena & Regner, 2018) . Thus, employment history is a significant factor in determining a borrower's credit worthiness.
References
Polena, M., & Regner, T. (2018). Determinants of borrowers’ default in P2P lending under consideration of the loan risk class. Games , 9 (4), 82.
Richardson, V. J., Teeter, R. A., & Terrell, K. L. (2017). Data analytics for accounting: Chapter 8 . McGraw-Hill Education.
