Creditworthiness – what affects it and how to improve it?

In each of our lives, it may happen that we need a loan. It is true that loan offers without BIK are constantly evolving, but it is worth being able to incur other obligations. Therefore, in this article we will look at creditworthiness, which is one of the most important aspects that lenders take into account when considering an application.

What is credit standing?

credit score

The creditworthiness determines the borrower’s ability to repay the loan. It is calculated, among others based on the applicant’s income. Of course, other factors are also taken into account, such as timely repayment of previous liabilities.

It is worth noting that non-bank loan companies also calculate your creditworthiness and take it into account when considering your application.

What affects creditworthiness?

credit score

The basic aspect is the amount of your income. If you earn more, then naturally you are able to take a larger loan because the bank knows you will have money to pay the installments. What counts is not only the amount of earnings, but also their “quality” – an employment contract is naturally more valuable than a work contract. However, if you have been working on a work contract for a long time and your income is documented, then you should also not have problems with successful consideration of the application.

Another aspect is credit history – if you have incurred obligations (even small ones) and paid them on time in the past, then your creditworthiness is better.

Of course, other factors are also taken into account when granting a loan: the most important are:

– Age – young people, e.g. less than 21 years old or older, e.g. those who are over 70 years old, may also have problems with taking a loan. Their creditworthiness is also lower.

– Duration of the loan.

– Loan duration.

– Other financial liabilities.

– Type of loan.

There are many factors, but the most important ones are listed above.

Ways to improve your credit standing

credit score

It is worth thinking about creditworthiness. You will need it, e.g. if you want to take a mortgage or simply a larger loan in the future. Therefore, below you will find some tips and ways that will help you improve your credit standing:

– Repayment of other financial obligations – every loan, every loan affects your home budget, thereby reducing your creditworthiness.

– Longer loan period – it’s also a very simple way to take a larger loan. Instead of looking for a loan for a year or two, you can choose one for several years.

– Building a positive credit history – taking equipment in installments or small loans. All this will help you build a positive credit history that will allow you to take a larger loan in the future.

– Getting rid of overdraft and credit cards – this will also positively affect the amount of loan you can apply for.

When determining your creditworthiness, you can use numerous calculators located on the Internet, thanks to which you will be able to estimate the amount of loan that you can apply for. It is definitely worth being aware of the factors affecting your creditworthiness, because this is the most important factor in determining whether the loan you are applying for will be granted to you.

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