Creditworthiness is important when you dream about a new house or apartment for which you want to take a loan. Each bank must check your credit standing before granting you a loan. In this article you will learn how you can effectively and completely legally increase your credit standing, so that it looks good for the bank. Greater creditworthiness is the opportunity to take a more expensive apartment or house, a greater choice on the market, as well as completely different options. Read our article to learn more about the difficult topic of creditworthiness assessment by banks.
High creditworthiness is primarily affected by whether we work. The bank must have confirmation of our work and income generated from it. Depending on how the employment contract we have is structured, our creditworthiness will be scored as high or not. In Poland, it is accepted that an indefinite employment contract is most valued.
Such an agreement primarily guarantees regularity of income and inflows to the account. With work or assignment contracts, it will be very difficult to get a mortgage because the receipts are irregular and very diverse. However, even with such contracts, it is worth applying for a mortgage. We will write about this type of agreement in one of the next articles on our blog. We encourage you to follow us regularly.
Persons receiving remuneration for running their own business
Will be assessed by the bank as in the case of an employment contract, paying attention to the regularity of income and the amount of remuneration. Companies that have just started a business are unlikely to get a loan, because such a company has no credit history, which means that their creditworthiness will be very low.
We have a contract, what else will the bank pay attention to when assessing our creditworthiness? Of course, the bank will focus on how much we spend and what we allocate these funds to. If we already have any loans and the costs of our monthly maintenance are at a high level, we can forget about the loan.
The bank likes to be sure that we will pay our liabilities. Our marital status is also important, for many banks it is important whether in the event of job loss there will be someone to pay back the loan, in the case of marriage the creditworthiness can be significantly higher than when taking a loan as a single. Persons who are subject to a maintenance obligation will also be slightly worse rated by banks. It is a permanent, long-term monthly commitment.
The borrower’s age is also a significant factor affecting our creditworthiness , as well as credit history. If we have paid all our liabilities on time, according to the schedule – it will definitely have a positive impact on the assessment of our creditworthiness. Matters such as the loan amount we want to obtain and the repayment period are also important. If we are a regular customer of a bank, such a bank may have special conditions for granting credit to us, because it has reliable information on our inflows to the account and many years of cooperation.
How to increase your credit standing?
Increasing your income while reducing your expenses is the best way to get a mortgage. It may be a good idea to find additional work that will give us regular income. It should be remembered that the bank will only take into account legal income confirmed by the employment contract or invoice for the company. It’s also a good idea to look through your bills, maybe make some delicate savings.
It is worth checking the current offer of satellite TV or cable TV, maybe the operator has an interesting promotion. It may turn out that we have been using television occasionally lately, it is worth thinking about reducing the subscription. Nowadays – many services pay for themselves from our account – it is worth making sure that all transactions we actually have to pay for. The reduction of telephone subscriptions as well as electricity bills (even by installing energy-saving light bulbs) will be an advantage for any bank.
Such an adventure with the reduction of monthly obligations – it will be useful in a new home! Why overpay. Of course, if we have any credit obligations, it is worth settling them to the end. If we have several different loans, here a consolidation loan can come in handy, which will provide one lower installment, which will allow for a more convenient, maybe even faster repayment. We need to start organizing our payments a few months before making a mortgage decision. In general, banks look back six months or even a year.
It turns out that they are not so good at all. Even if we do not use a credit card, it has a limit on it that we can use immediately to get into debt. For many banks, having credit cards has a very negative impact on our credit standing. If you haven’t used credit cards for a long time, it’s worth terminating your contract with the bank. We will have one more place in our portfolio, and at the same time our credit standing will increase.
If we actively use credit cards, it is worth considering their full repayment and liquidation. Similarly to credit cards, there are debit limits that many people have allocated to the invoice. These limits also allow you to quickly get into debt without making a single phone call or visiting a bank that could assess your creditworthiness again. By getting rid of this limit, we will increase our credit standing.
When applying for a mortgage we can observe many nuances. One of them is what installment we will choose. When choosing decreasing installments, the first installments will be very high, which will effectively reduce our credit standing. Therefore, it is worth choosing equal installments in this case, which will positively affect the assessment of creditworthiness. Equal installments are also an equal commitment, thanks to which we can conveniently automate the entire repayment process on our bank account.
The installment amount also has a significant impact. Here it is worth measuring your intentions. Spreading the loan over a longer period, and taking a smaller loan will significantly increase our credit standing. Here, it is also worth thinking about a larger first payment, which will cause that we will need a smaller loan to buy real estate.