Creditworthiness is the most important factor that decides whether or not to accept a loan application. It turns out that people who have financial problems very often cannot get a loan. How to fix it? It’s best to know your credit standing and how to improve it.
What is creditworthiness and how to check it?
Creditworthiness is the possibility of paying off a loan or borrowing along with the costs of obtaining it in predetermined dates. Financial institutions can only borrow money to those who are able to pay their debts. No wonder the requirements are increasing – so many customers just don’t pay back loans or credits.
Methods for checking and calculating creditworthiness
There are two methods for banks to check their creditworthiness.
quantitative analysis – the bank primarily estimates the income stability of the potential customer, thanks to which it will be able to regularly repay the loan or loan.
qualitative analysis – the bank focuses not only on the client’s earnings, but also on his personal characteristics, checks the history of account operations and the timeliness of repayment of previously held loans or credits; such analysis is often based on information from outside, e.g. from economic or credit databases.
What do you need to check your creditworthiness?
There are a few specific things you can ask about from a bank employee.
What assets do you have and what is your monthly income?
Under what contract are you employed (for work, job, work)
Your monthly living expenses
Other liabilities, e.g. maintenance or loan
It is difficult to list each of them – it all depends on the employee and the bank’s policy. Loan companies usually ask about fixed monthly income and check in the debtors’ databases whether the potential customer is in arrears with payments for previous loans or advances.
The best ways to improve your credit standing
Depending on your needs, there are several methods to improve your credit standing.
opt out of credit cards and overdraft
regularly pay off your obligations, then you will be a reliable and solvent client for a financial institution
when applying for a loan or credit, analyze all possible revenues that the financial institution considers; if possible, include quarterly bonuses, income from other sources such as 500+
Extend the loan period to the maximum – smaller installments will increase your chance of regular repayment, and consequently improve your creditworthiness
if you have other loans: pay off or consolidate them – lower installments can have a positive effect on your creditworthiness