How to check and improve your credit standing?
One of the most important factors determining whether a customer receives a loan is his creditworthiness. What exactly is the concept? Can borrowers have any influence on their creditworthiness? You’ll find answers to these and other questions in the article below.
What is credit standing?
As a rule, after completing the loan application, the client must wait at least a dozen or so minutes to answer whether his request for a loan has been positively considered by the loan company. During this time, the lender assesses the creditworthiness of the potential borrower. It consists in checking whether the client’s current financial capabilities will allow him to pay off another commitment. The analysis includes other liabilities incurred and their total amount and monthly household income. Some factors can significantly reduce the borrower’s creditworthiness.
Where do lenders check the financial obligations of their clients?
Lenders can check information about their clients at the stage of applying for a loan. When filling out the application, you must provide accurate information, because all of them can be checked by the loan company. The data of future borrowers are checked in the databases of debtors, such as GFI or KRD. The registers contain all data regarding current liabilities as well as in some cases past loans and credits.
Thanks to these debtors’ bases, the lender can find out whether the person applying for a loan in his company has paid his liabilities reliably and on time. Borrowers who have delayed settling their obligations must reckon with the institution’s rejection of their application due to their low credibility.
Recently, more and more loan companies are using the Credit Check database. Thanks to it, lenders have the opportunity to check if the customer already has any other debt. The register also contains information on late repayments or unregulated debts. Thanks to this database, fast data flow between loan companies is possible. In this way they are able to better assess the creditworthiness of their clients.
Customer income analysis
When assessing creditworthiness, loan companies also take into account information about the client’s income. Thanks to this, they can find out whether the installments of the commitment will not exceed the financial capacity of the household. Some entities only require a declaration regarding the amount of income, while others may require the provision of an appropriate income certificate from the employer. Everything depends on the internal policy of the loan company.
Thanks to the information collected, the lender is able to assess whether the next commitment will be regularly repaid by the borrower. The application will be accepted when the loan company is sure that the client will not have difficulty paying off his debt. If you receive a negative decision, you can try to apply for a loan from another non-bank company, which, for example, declares that it provides financial support for people in debt. However, there are some ways that will help improve creditworthiness …
How to increase your credit standing?
Borrowers are rarely aware that they can affect their creditworthiness in any way. Here are best practices that will help you increase your credibility as a potential customer taking out a loan.
Before applying for a loan, write your obligations on a piece of paper. How much and what institution you owe money to. It’s best to pay back those loans that are nearing the end and those with the lowest installments. Then information will appear in the registers that the debt has been settled. Each less commitment is more creditworthiness. People who are unable to settle their debts in advance may try to extend the loan period. Thus, the monthly installment will be lower, which will translate into greater creditworthiness and lower monthly burden on the household budget.
Appropriate income documentation is another way. The lenders nevertheless look more favorably at people who have a steady income, i.e. are employed under a contract of employment, receive a pension. Clients working on a specific work contract should collect contracts and proof of payment from their clients. Lending companies also treat as a source of income, among others maintenance. In the article “What income source can I take out a loan for?”, We’ve looked at what lenders think is a reliable source of income. In general, there is one rule – the more income is documented, the higher the creditworthiness.
A positive credit history is also an important element of creditworthiness. Contrary to appearances, lenders do not look favorably at people who do not have any entries in the database of debtors. As a result, they are not always able to assess whether a given client will be reliable and timely. Building creditworthiness should start with taking small loans, free payday loans or buying equipment in installments.
The information contained in the debtors’ databases is a valuable source of information for loan companies. The most popular base in our country is the Credit Information Bureau, or GFI. To monitor entries in this database, simply create an account on the official website. This way you can monitor your chances of getting another loan on an ongoing basis.
The last way to improve your credit standing is to find additional collateral for your liability. A loan guarantee can make the difference between whether the lender will provide financial support. However, it is worth remembering that when deciding to secure the loan, we should choose a surety adequate to the amount of borrowed funds. Thus, a liability worth several thousand should not be taken as collateral for an apartment.
How can you check your credit standing?
The borrower can independently check his credit standing. Reports from debtors’ databases can help him with this. You can set up your customer profile in GFI and GL. In this way, you can monitor your credit history thanks to special financial capacity reports.
Before we decide to take out a loan, we should use a comparison website. It allows you to choose the amount of the loan (including installments and their amount) to the financial capabilities of the client.