ABSTRACT Prequalifying contractors is an important task of project owner to screen out the contractor’s capabilities. In general, a predetermined set of criteria including contractors’ financial standing, technical ability, management capability, health and safety, and reputation is often screened out through the contractor prequalification process. This study attempts to employ an approach using the cash flow model proposed by Liao, Chen and Su (2007) to assess the Vietnamese contractor’s financial standing in prequalification. The main reason leading to the most of construction company failure is not inadequate management of other sources, but because of lacking sufficient cash flow to support daily expenditure. Therefore, it is important to have an appropriate evaluation of contractors’ financial aspect in prequalification process. The cash flow based structural model with dynamic threshold can simulate and list the credit quality score of each construction contractor from the cash flow of firm. Thus, the financial qualified contractors can be differentiated from those who are disqualified. The study employs the Area Under Curve (AUC) to evaluate the discriminatory performance of the model in rating the contractor credit in two years and use the credit rating performed by a Vietnamese bank as the benchmarks. The empirical results figure out that the cash flow based structural model with dynamic threshold is with excellent discriminatory power: AUC = 0.8333 in first year; AUC = 0.8095 in second year. These indicate that this model can be applied to assess the credit risk of construction contractor. Moreover, since this model only requires the information of accounting statement, it is applicable in both listed and private construction contractors.