If you want to get a cash, consolidation or mortgage loan, you must prove your creditworthiness, which is a financial situation that allows you to repay the liability. It depends on the results of the analysis of your ability that it will depend on whether you get the funding you want.
If you are afraid of a negative rating
Check how to increase your credit standing, and thus your chances of borrowing cash at the bank.
Checking your creditworthiness before the loan can be avoided. The bank must carry it out to make a financing decision.
To increase your chances of a positive consideration of your application, check your financial capabilities and improve your credit standing if necessary. It is not difficult – all you need to do is use the methods presented below.
What is creditworthiness?
Before we get into the question of how to increase your chances of a successful loan application, let’s explain what creditworthiness is. This is the borrower’s financial standing at the time of applying for a loan.
The bank conducts its analysis in order to check if the person will be able to repay the loan at all costs. In short, it is about confirming that the borrower will be able to pay the monthly installments. The methods of such assessment may vary depending on the bank, as well as whether you are applying for a small loan or a mortgage.
Individual institutions usually take into account many factors, but creditworthiness is mainly determined by the amount of earnings, as well as the difference between income and liabilities – the larger it is, the better the financial situation.
How to increase your credit standing – ways to improve your credit
Before applying for a loan, especially the one to buy real estate, it is worth checking whether there is a chance for it to be considered by the bank. You can do it with a free tool available on the Internet, which is the creditworthiness calculator.
After entering the basic parameters of the loan you are interested in, as well as information about your income and liabilities, you will receive information on what loan you can afford. If the result is unsatisfactory, it will be necessary to increase creditworthiness.
And how to do it in practice? How to improve your credit standing? Learn simple methods that will help you in this.
Analyze your finances
This is the first step to improving creditworthiness. Calculate your income accurately (consider only those that you can document) as well as your commitments. In the case of the latter, write down all permanent charges arising from credit cards, loans, installment purchases as well as bills and other costs.
An analysis of this data will show you what has the biggest impact on your poor credit standing – maybe it will be too low income or maybe too high spending.
Increase your income
The amount of income has the greatest impact on creditworthiness. If you want to get a loan, it may be a good time to ask your boss for a raise or even change to a better-paid job.
However, remember that the bank takes into account the earnings from at least the last 3 months, so after increasing them you will need to refrain from applying for a loan.
Ensure a stable source of income
When assessing creditworthiness, banks look not only at the amount of income but also at their source. It should be permanent, therefore employment based on an indefinite employment contract is rated best.
So if you are on a probationary period or have a fixed-term contract, wait until it changes to a permanent one and applies for a loan after a minimum of 3 months.
Check your credit history in Credit Checker
All our credit obligations and whether we settle them on time are recorded in the Credit Information Bureau database.
The bank uses this register, so before applying for a loan it is worth checking the Credit Checker – thanks to that you will find out how high your debt is and whether there are any arrears in the register that may affect the negative assessment of your creditworthiness. Maybe some payments have not been recorded and you may not be aware that you are in arrears with payments.
Repay credit obligations, if possible
If you’re wondering how to increase your credit standing, try to pay off your existing credit obligations, especially those with arrears in Credit Checker. Before applying to the bank for the loan, pay off payday loans, reduce the debt on the invoice (debit), get rid of the credit card, close the installment loan taken in the store, etc.
Consolidate loans to reduce your monthly charges
If you pay off several loan products, try to combine all previously paid installments into one smaller one. To do this, you need to go to the bank for a consolidation loan. Thanks to it, you will reduce your monthly charges, which will automatically increase your credit standing. However, remember that consolidation is associated with additional costs and an extension of the repayment period.