What is credit standing?
Let’s start from the beginning, so by defining what creditworthiness really is. The creditworthiness determines, on the basis of several factors, the possibility of timely repayment of the obligation, i.e. repayment of the loan installments. It depends on the creditworthiness whether the bank or lending company decides to grant the requested amount to the client, or offers another solution, e.g. a loan for a lower amount or a loan with a longer loan period. Creditworthiness can be determined in various ways. That is why it may happen that one institution will refuse us a loan and we will receive it in another. The exact calculation of creditworthiness is influenced by the individual approach of the bank or loan company.
Factors affecting creditworthiness include, among others
- source and amount of income;
- the number of dependents of the person applying for a loan;
- having other liabilities such as outstanding loans and credit cards.
Increase your credit standing!
If you plan to take out a loan for a high amount, you should increase your creditworthiness. First of all, it is worth giving up credit cards. Even if you do not actively use them, the mere possession of them, and therefore the possibility of using it at any time, significantly reduces your creditworthiness . Remember that your creditworthiness is also affected by your unpaid liabilities. Not only loans or cash loans, but also installments for electronics, household appliances and furniture. If you want to get a loan for a high amount, you should pay the previous obligations first. Also remember to adjust the loan amount to the repayment period. When making commitments for large amounts, you should opt for a longer loan period. As a result, the monthly installment will be lower, and thus will not burden our monthly budget too much.
Caring for creditworthiness
It is worth taking care of your creditworthiness, because its negative assessment will prevent us from getting a loan. Remember that each institution has a different approach to assessing creditworthiness. Thus, refusal at one institution does not mean that you will not get the loan you need from another lender. Before you decide to apply for a loan, you should try to calculate your borrowing capacity yourself. To do this, create a table, you can use Excel for this. Enter income in one column and write down expenses such as utility fees and the amount you spend on grocery shopping in the following. Then calculate what amount in your monthly budget is the free amount. The installment of the loan you intend to apply for should be lower than the amount that remains on your budget every month.