Creditworthiness is a set of factors that banks analyze when granting a loan. Such analysis is done on the basis of points given for certain factors. Simply put, when we apply to the bank for a loan, the bank assesses whether we will be able to repay it regularly.

There are many factors that affect our creditworthiness. First of all, the following are taken into account:

  • income and its stability
  • monthly living expenses
  • education and occupation
  • type of employment
  • age and marital status
  • number of dependents
  • credit history
  • presence of other debts

Banks divide these factors into what they call quantitative and qualitative analysis.

Quantitative analysis is a comparison of our income with our monthly living expenses. By comparing these parameters, the bank assesses whether we have enough money left over to make regular loan payments. When analyzing the cost of living, in addition to standard payments, it is important whether we have other debts such as cash loans or leases. Their presence can negatively affect our creditworthiness.

Qualitative analysis is an assessment of our education, occupation, age, marital status. Our credit history and the history of our bank accounts are also checked.

Banks evaluate all factors very carefully before issuing a decision, fortunately, some of these factors are within our control. It is worthwhile before applying to contact a mortgage broker with whom you will be able to analyze in which bank is the most favorable offer and in which you have the best chance of getting a loan.

How to improve your creditworthiness?

Fortunately, there are ways to improve our creditworthiness. However, we must remember that in many cases it is impossible to do this overnight. Increasing your creditworthiness can take several months, depending on the requirements of the banks. What can we do to improve our creditworthiness?

  • Ensure stable employment – indefinite employment contracts are the highest rated. Most banks require a minimum of three months on such a contract. So if you have a fixed-term contract, it is worth trying to renegotiate the form of the contract.
  • Pay off your debts – cash loans or leases taken out can significantly lower your ability. Early repayment of debts is associated with an immediate improvement in our creditworthiness.
  • Get rid of credit card limits – even if you don’t use your card but have limits on it, the bank counts them as financial liabilities, which also lowers your creditworthiness.
  • Pay your bills on time.
  • Don’t make loan requests to too many banks at once – a large number of requests can lower your credit score and reduce the chance of a positive decision.
  • Increase your income – it’s a good idea to try to negotiate a raise a few months before submitting loan applications.
  • Take care of your own contribution – it is a good idea to have an own contribution of 20% of the value of the property, as this will favorably affect the assessment of our creditworthiness and we will get better terms than with a lower contribution.
  • Think about property separation – this point refers to the situation in which one of the spouses has an unfavorable credit history. In this situation, thanks to the separation, only one person will be assessed.
  • Choose equal installments – by choosing equal installments we can automatically increase our creditworthiness because decreasing installments are much higher in the initial period of the loan.

This is only a part of the possibilities to increase our creditworthiness in the bank. As a final point, it is also worth mentioning to take the help of an experienced credit expert – remember that credit experts deal with loans on a daily basis so they are very familiar with the offer and requirements of banks. An experienced expert will efficiently guide you through the entire process, checking your ability will assess in which bank it is best to submit documents so that the chances of getting a loan are as high as possible.