Certainly, everyone who has ever had at least minimal contact with banking products has encountered the phrase creditworthiness on their way. Most people are already aware that this is something that depends on the bank’s response to the loan application.
Knowledge about what constitutes creditworthiness is far less common, and it’s a shame. Being aware of what our creditworthiness depends on, we open ourselves to the possibilities of improving it. We already know how the bank checks creditworthiness and what we need to change to make it better with us.
What is creditworthiness
In the beginning, it is worth considering what exactly creditworthiness is and why banks put so much pressure on it. It can be defined as the ability of the potential borrower to pay back the debts incurred – firstly on time, and secondly along with commissions, interest, and other similar fees. It is important for the bank mainly because it allows you to assess the customer’s credibility and whether it is solvent.
So what if someone has good earnings if, despite this, they have notoriously been late in paying their installments in the past? It is good that someone else has repaid previous obligations on time, but in turn, has too low income to support the loan he is now applying for. This is the logic according to which banks operate.
Elements of creditworthiness
There is a reason why the bank requires you to attach your income certificate to the application – they are one of the most important elements of creditworthiness. However, the bank only gets the true picture of our financial situation when it deducts all expenses, fees and other obligations that empty our home budget every month.
The amount that remains after doing so should significantly exceed the installment of the loan you want to receive. In addition, other factors are important to which we do not always pay attention.
Not everyone is aware that the form of employment matters.
The best chances of getting a loan are people employed under an employment contract, preferably for an indefinite period.
Age and marital status are also important (married persons are in a better position). In addition, the bank also verifies our credit history by checking us at the Credit Information Bureau and Economic Information Bureaus.
If you are wondering how to check your credit standing, we can easily do it using online calculators.
It’s good to know how the bank checks creditworthiness so that it can be easier to improve
The answer to the question of how to check your creditworthiness is fortunately relatively simple – all you need is the Internet. Thanks to this, we can verify whether the changes we make have a positive impact on it.