Creditworthiness, check how you can improve it!

9 May

Are you ready for winter sales, want to go on a foreign vacation or plan to buy an apartment, but you realize that without a loan, you probably have no chance to make your dreams come true? Check what you should do to improve your quotes in the bank’s eyes.

Each bank has its own internal regulations, which are guided by considering loan applications. Some banks provide loans willingly, others act more cautiously and require their clients to meet many different conditions. One thing is certain – no bank will grant a loan without first checking the applicant’s creditworthiness. Assessing this ability is a key element of any credit procedure. It depends on it whether the bank decides to grant a loan or to submit the application.

What is creditworthiness?

Creditworthiness is the ability to repay a contracted liability with interest determined in a specified time.

When checking the creditworthiness of the applicant, the bank takes into account first of all:

  • amount of income earned,
  • monthly maintenance costs, such as rent or utilities,
  • the number of current liabilities – loans (including those in which the applicant acts as a guarantor), loans, credit cards, account limits, etc.,
  • Applicant’s credit history available at the Credit Information Bureau (BIK) – that is whether the existing liabilities were settled on time.
  • Other information about the applicant may also be relevant to the bank, such as age, marital status, number of dependents, education, place and work experience, etc.

What to look after before applying for a loan?

What to look after before applying for a loan?

When trying to get a loan, especially a large loan, it is worth not only to carefully analyze your financial possibilities, but also to take care of your creditworthiness in advance. How to do it?

Check your creditworthiness – review your BIK report to make sure your credit history is positive.

Take care of timely payment of receivables – the creditworthiness is very much influenced by whether you pay your liabilities within the prescribed time. For the bank, it is information whether you are an honest customer or not. Your credibility drops when your arrears exceed 30 days. To make sure you do not pay anything, pay off your liabilities ahead of schedule instead of leaving it for the last minute.

Do not incur any new obligations and refrain from making purchases in installments – if you think about taking out a loan for a larger amount, make sure that your existing liabilities have been repaid. At least to receive a reply from the bank, do not take out a new loan (even for a small amount) and cancel the installment.

Cancel or reduce your credit card – even if you do not use the credit card or personal account limits when applying for a loan, the bank will take them into account. It assumes that you can start using the limits as soon as you receive the loan.

Show employment stability – the bank, next to the amount of the salary, also looks at the type of contract of the applicant. The safest form of employment (from a bank’s point of view) is a contract of employment, preferably signed for an indefinite period. Getting a loan when you are a self-employed person or working on a contract or an assignment contract is obviously possible, but the bank will certainly request a detailed income confirmation.

Be careful with credit guarantee – if you plan to ask the bank for a large loan, do not take out a loan for another person. The sponsors’ data is also transferred to the BIK system, and any delay in payment negatively affects the assessment of your creditworthiness.

Do not make too many credit inquiries to several banks – remember that all applications for a loan or loan submitted by you will be visible in BIK. The more they are, the lower the rating of your creditworthiness will be. Before sending the application, make the selection and submit the documents only in selected institutions. It is a good idea to use the help of a credit counselor who will analyze your financial situation and indicate banks in which the chances to borrow the expected amount are the highest.

Consider taking a loan with another person (parent, sibling, partner) – in some situations, this is the only way to get a loan. A joint loan is an additional security for the bank, because the borrowers are jointly and severally responsible for the timely repayment.

Extend the repayment period – this allows you to reduce the monthly installment, which will translate into an increase in creditworthiness. However, you must remember that a longer loan period is associated with a larger amount to be paid to the bank for the loan service itself.

Choose equal installments – as opposed to the so-called in decreasing installments, installments of equal amount do not require a larger injection of cash at the beginning of lending, so the chances of getting a loan increase.

Decide for other products of the bank – the bank looks favorably on people who decide, for example, to purchase additional loan insurance, offering them a lower margin or a better interest rate. Often, it also provides preferential credit conditions to people who have been in an open account for some time.

If you have not yet taken up no financial obligations, and you want to try for a mortgage, for example, build your credit history to become more credible for the bank. All you have to do is take out a small loan or buy something in installments and repay it on time. In this way, you will show the bank that you are an honest borrower.

Remember!

Make a loan in the currency in which you ern. It’s a golden rule that usually works. Banks, taking into account the unfortunate case of an increase in the value of the Swiss franc, also apply additional collateral – from borrowers wishing to borrow money in a different currency, they require significantly higher creditworthiness.

What to do if you do not have credit worthiness?

What to do if you do not have credit worthiness?

Have you checked everything and you already know that with your creditworthiness is not the best and the bank will definitely not give you credit? You can decide to get a loan from a loan company. Pay attention to whether the institution applies to the anti-usury law, look for opinions on the internet and carefully analyze the available offers. Choose the one that is clearly described and there are no hidden costs.

However, before you do it, make sure you do not get a loan, any non-bank loan even the cheapest is many times more expensive than a bank loan.

Contact us and we will determine in a few minutes what is preventing you from getting a loan!