Craddock will lead the side in the crunch relegation clash with West Ham at Molineux on Saturday week as regular skipper Henry begins a three-game ban following his red card at Wigan.
McCarthy believes 35-year-old Craddock is getting better with age after his days looked numbered at Wolves a couple of years ago when he was loaned out to Stoke.
McCarthy confirmed: "Jody will be playing against West Ham and he will have the captain's armband on.
"He has been fabulous for us this season. His performances have been outstanding. He has been our best defender.
"He is a better player now than when I loaned him out to Stoke and he is better than last season. He's been excellent and so solid."
McCarthy insists the mood among his players remains upbeat despite a run of four successive defeats pushing them into the bottom three.
He said: "We had a flying start with five points from the first three games and now after seven games it is a poor start.
"The mood is all right. It is not like last season when we lost at home to Birmingham and we were probably doubting ourselves a bit.
"We haven't played poorly. Our performances don't look like a team which has only got five points.
"But no-one gives a fig that we've been unlucky or had decisions go against us."
Source: Team Talk
Source: Team Talk