Low creditworthiness is one of the most common reasons for which people will meet in banks with loan refusals. So we know what effects it can have for us. Therefore, it is definitely worth expanding your knowledge of creditworthiness. Even if it seems to us that we will never take any credit, life can surprise us, and then it is better to be prepared for everything. Then what do you need to know about creditworthiness?
What exactly constitutes creditworthiness?
The expression “creditworthiness” is likely to be known and heard by many adults. However, most people have no idea what’s really behind it. Creditworthiness consists of factors such as:
- amount of revenues
- cost of living
- other financial liabilities held
- form of employment.
In addition, frequent submission of various credit inquiries may disadvantage our creditworthiness, especially if we receive a negative response.
The amount of income, cost of living, employment form and other financial liabilities are quite obvious factors. What about the rest? Age is important for the bank mainly in that usually its limits are used (eg 65 or 70 years). Education is not a very important factor, but the higher it is, the better – sometimes even this can prevail about whether the loan will be granted (especially in the case of long-term loans).
Low credit standing can be improved
Low creditworthiness does not mean that we have already lost and we will never be able to get a loan. Just as creditworthiness can decline, so can it increase. Both in completely obvious ways (for example, as a result of receiving a raise at work), but also in ways that we could not necessarily come up with alone.
If you want to increase your credit standing, see here. It will turn out that with a little effort it is possible, even in a bad situation.
Creditworthiness is not everything
Creditworthiness is undoubtedly extremely important, but even if it is high, it does not automatically mean that without any problems we will get the loan we want. We must not forget about something as important as credit history.
What is credit history? This is the story of our current and repaid liabilities, namely whether all installments were repaid on time and, if not, how late.
Having a negative credit history has a very bad effect on us – then we seem to be an unreliable and unreliable customer. Contrary to appearances, an empty credit history is also not good for a potential borrower. Therefore, be sure to check how to build a positive credit history.