Recently, we have been investing in ourselves more and more often, we are realizing our plans and dreams more boldly. Some of them require financial outlays, which is why we are happy to take out loans.
A wide range of attractive offers means that everyone can find a loan tailored to their individual needs and possibilities. Creditworthiness is such a possibility. What is she What affects creditworthiness? How to calculate it and build it? We’ve included the answers to these and other questions in the article below.
What is credit standing?
Creditworthiness is a prerequisite for receiving a loan and means our ability to repay our liabilities. Before signing the contract, the lender has a statutory obligation to verify and check the creditworthiness of each client. Therefore, it thoroughly analyzes our financial condition, past credit history, and even age or place of employment.
Consider the situation when two of our friends ask us to borrow a certain amount of money. We know that one of them has a permanent job and always pays the debts on the agreed date. The second one is used for occasional jobs and often has problems paying back the debt. Which of them would we be willing to borrow money from? The answer is obvious. Lenders check their clients in a similar way, using quantitative and qualitative analysis.
What affects creditworthiness?
To determine creditworthiness, credit analysis is used, which is divided into quantitative and qualitative.
Quantitative factors include:
- The amount of income – salary, income from the rental of real estate, etc. Of course, the higher, the better our credit standing.
- Sources and regularity of income – although it might seem that the amount of money flowing into our account each month is crucial when determining creditworthiness, and equally important, if not more important, is the source of income. Lenders rate best those obtained from a permanent employment contract.
- Monthly living costs – bills, rent, etc. we pay
- Current debts – by calculating our creditworthiness the lender checks if we repay or guarantee any loans, and if so in what amount. Additionally, account overdrafts or credit card debt are also analyzed.
Qualitative factors are, in other words, personality traits, i.e. the borrower’s age, marital status, number of dependents, education, occupation or housing situation.
The qualitative factors also include the current credit history, including timely repayment of financial liabilities incurred.
The creditworthiness is also assessed on the basis of criteria such as the amount of the loan applied for or the loan period.
If you need extra cash, we offer a short-term loan We have reduced the formalities to a minimum, so submitting the application takes only a few minutes. And all without leaving home.
Creditworthiness: how to calculate it?
We must remember that the above-mentioned factors are just examples of information that lenders use to check our creditworthiness. There are many variables taken into account before considering the application, and each institution has its own individual procedures.
Although we will not avoid checking our creditworthiness by the lender, we can do it on our own in parallel.
The easiest way is to download a report at the Credit Information Bureau. We can do this online by filling out the appropriate form. The received report contains information about all our financial obligations to date.
Another way is to use online calculators. Providing information on the amount of income, expenses, living costs, current obligations, as well as the interest rate and loan period for the loan we apply for, we will calculate the amount we can count on with the lender. Remember, however, that this is only a simulation, and the calculator is not able to determine whether our credit history will allow a positive consideration of the application.
How to build a creditworthiness?
There are several ways to build a positive credit standing. Let’s see what steps should be taken to be able to get a better loan.
This is. This may seem strange, but financial commitments can help us make more. How? Loans are not only an injection of extra cash that allows you to make your dreams come true and pay for unexpected expenses, but also proof for future lenders that we are solvent and we pay our liabilities on time .
- We regularly check the BIK reports
Problems with creditworthiness do not have to be due to our insolvency. Perhaps we are not even aware of the fact that someone who took a long time ago ID card took a loan that is not paying off or interest is charged from our account, which has not been used for years. All this type of information is contained in the documents we receive from the Credit Information Bureau.
- Let’s pay the liabilities on time
Planned repayment of liabilities is one of the main factors taken into account when assessing creditworthiness, so we should ensure that we do not exceed the deadlines set. If for some reason we can’t do this, let’s ask the lender to extend the repayment period.
- Let’s build a good relationship with the lender
Financial institutions are more willing to cooperate with people who were their clients in the past and who show a positive history of cooperation. So if you are going to apply for a larger loan, you should think about taking out a smaller loan and pay it back on time.
Positive creditworthiness enables us to take out a loan whenever we need it. So let’s take care of her. Short-term online loan is a cash injection of up to USD 8,000 with APR 1968.24%, which we can easily get without leaving home.