What determines creditworthiness?

A consumer’s creditworthiness determines their ability to properly meet the financial obligations associated with a loan. Before submitting an application, everyone interested should make sure that it is as high as possible. It depends on:

  • income – the amount of one’s salary is closely correlated with the maximum amount for which a prospective borrower may apply;
  • expenses – higher monthly costs mean, in the bank’s view, a lower ability of the applicant to repay a new obligation reliably;
  • length of employment – employment stability matters (for example, an indefinite-term employment contract);
  • credit history – a reliable record regarding other financial obligations is valued (impeccable repayment punctuality);
  • age – the older the applicant, the greater the risk the bank assumes by granting them a loan.

All the factors influence one another. For example, if a borrower has a very high monthly income, bank employees will not pay quite as much attention to the amount of current expenses (although this does not mean that they will leave this element entirely unanalyzed). The situation will be different, however, in the case of someone who is wealthy but elderly – in that case, granting a loan may prove too risky.

Assessing a consumer’s creditworthiness – how can you do it yourself?

Fortunately, no consumer is required to submit a loan application merely to find out what their creditworthiness is. It can be checked in other ways, including by:

  • calculating their budget – they should conduct a thorough analysis, taking into account salary, bonuses, alimony, bills, rent, food and transport; both all income and expenses will be important;
  • drawing conclusions from the budget – the conclusions must clearly show that the interested party manages their financial resources in a way that will allow them not only to repay the new obligation but also to function comfortably;
  • checking their credit history – the next step is obtaining a report from BIK (the Credit Information Bureau); the applicant must eliminate all negative entries, replacing them with positive ones;
  • using a loan repayment calculator – available online, for example at the link https://www.bankier.pl/smart/narzedzia/kalkulator-zdolnosci-kredytowej, it allows users to calculate installment amounts and the total cost; this makes it possible to estimate whether the budget will be sufficient (and thus determine theoretical creditworthiness).

If, however, one’s own analyses do not inspire sufficient confidence, the recommended solution is to use the services of a professional financial adviser – they can effectively estimate the chances of obtaining a loan and recommend several ways to increase the effectiveness of the steps being taken.

What do bank employees consider first when reviewing an application?

Reviewing a loan application is a complicated, time-consuming and complex process – where does it begin?

Bank employees first pay attention to the applicant’s creditworthiness. They must make sure that devoting time to analyzing the document makes sense, so as not to waste unnecessary resources. If it turns out that there is a chance that it is sufficient, the next step is to verify income – documents confirming it are checked (for example, an employment contract, bank account statements and tax information), with particular focus on any indications that make it possible to establish whether the income is regular, stable and sufficient to cover the loan installment.

After that, representatives of the selected financial institution examine the credit history. They check whether the borrower achieved good results in repaying previous obligations (scoring), as well as whether they had problems repaying them in the past. They do this by carefully examining the BIK report.

They then proceed to diagnose the individual situation, which consists of factors such as:

  • total length of employment;
  • age;
  • type of previous employment;
  • family (whether or not one has one);
  • cost of living;
  • owned assets.

How can you increase your creditworthiness? What steps will help increase the chance of success?

The result of a reliable analysis of your own creditworthiness is... ambiguous? In that case, instead of taking a risk and deciding to submit an application, it is better to take several steps that will certainly change it in the borrower’s favor. These include:

  • increasing one’s income;
  • reducing existing expenses;
  • repaying overdue obligations;
  • increasing the down payment;
  • improving one’s credit history;
  • deciding to take out a loan with another person.

Increasing one’s monthly salary is not an easy task, however, and often requires changing one’s current position – this causes an unfavorable modification regarding an indefinite-term employment contract (too much risk for the bank). Therefore, it is recommended to find additional temporary part-time work.

A recommended solution for reducing expenses is to give up having a credit card – bank representatives count it as a potential cost.

An applicant can improve their credit history by taking out a small cash loan. Regular repayment of the new obligation will build the financial institution’s trust.

In conclusion, calculating your own creditworthiness is not only possible but also sensible and recommended. It will allow the borrower to make sure that they have a chance of receiving funds to purchase real estate and, in some cases, may even improve their situation.