Creditworthiness is a key element on the basis of which the bank determines the amount to be borrowed from the borrower. It depends on the creditworthiness of whether the bank will grant the applicant a loan.
To increase your chances of getting a positive credit decision, it’s important to know what affects your credit standing and how to improve it.
How does the bank check creditworthiness?
The most important factors affecting creditworthiness include the amount of gross income earned and whether the customer has any liabilities towards the bank, e.g. in the form of installments. In addition to the monthly income, the source for the salary is important for the bank – based on the employment contract, mandate contract, etc.
Important: The source of income must be legal and documented.
What else does the bank consider?
- the borrower’s marital status and the number of dependents
- professional status (e.g. own business, permanent employment contract)
- credit history
Creditworthiness – how to increase it?
Sometimes we need to borrow a larger amount than the bank offers us. Can we improve credit standing? Yes, there are ways to do it. First of all, we need to verify our obligations and if we have debts – pay them back as soon as possible.
When we are charged by credit cards, we can also try to reduce their limit. We can also opt-out of those that we do not use. It is also a good idea to submit a loan application with a co-borrower – in this case, you must remember that both the person’s history and creditworthiness are good.
How to increase your credit standing – other sources of income
When calculating creditworthiness, banks also take into account other sources of income that may have a positive effect on creditworthiness. We can include them:
- rental and lease income – having a property that is rented or leased, the household budget is “topped up” each month with an additional amount that builds creditworthiness;
- income from copyright. e.g. for books, songs, written programs, etc.
- financial income from capital investments
- income from function or appointment, e.g. as a member of the management board – members of the management board may include in the application information about additional income obtained in the performance of a given function;
- dividend – this is a part of the company’s profit paid to shareholders. The dividend is paid when the company generated a positive financial result;
Where to check your credit standing?
You can check your creditworthiness at your bank’s branch, but you can also use the online creditworthiness calculators. These services are very intuitive and easy to use, so the initial check of your creditworthiness takes literally a few minutes. Importantly – the calculators are constructed so that we can check your credit standing.
They can be used both when applying for a mortgage and other forms of financing – e.g. cash loan. They will also help us to determine the amount of future installment.