In the interest of attractive credit terms, from the beginning you should put a lot of effort – not only in finding the perfect match, but also in looking into your pocket and arranging financial products. Such comprehensive actions will help you succeed.
How do banks calculate creditworthiness?
The bank takes into account many factors, but the most important is the sum of your monthly revenues and the amount of liabilities . The difference between these elements shows how much money you have to maintain and whether you can repay the loan.
In addition, the bank takes into account, among others:
- type of contract at the workplace,
- marital status,
- borrower’s age,
- cost of living,
- loan repayment time.
It should also be remembered that the so-called Recommendation S has been in force since 2012. This means that when calculating the loan installment, if we take it for more than 25 years (e.g. 30), we assume that the housing loan is granted for a period of 25 years. Thus, the calculated installment does not coincide with the actual, which often significantly reduces creditworthiness.
How to improve your credit standing? – 5 proven ways
Already at the planning stage, think about improving your creditworthiness. If you are a specialist in a given field, it is worth – without giving up your current one – look for an additional source of income or change your job to a better-paid one. Of course, also consider the following issues – whether the future employer guarantees stable employment, or whether the time devoted to work will be so favorable that it will allow you to enjoy a new home or apartment.
1. Plan your budget
The first step is to take a close look at your finances and plan your home budget – all credit calculators and rankings will also be helpful here, it is worth buying professional literature or using ready-made sheets – in-depth analysis of our expenses will facilitate budget planning and the bank will estimate the cost of living lower.
2. Consider credit with your spouse
Consider also the possibility of joining the loan with additional borrowers – for example a husband or unmarried siblings (here it should be remembered that most banks will not allow a loan to be taken to a person who will not be able to pay it back until reaching a certain age – the most common restrictions in banks are from 70 years old and above). On the other hand, the fewer installments you want to pay back (placing for a shorter period), the higher the installment. Sometimes this factor underestimates creditworthiness. Be sure to also choose the most favorable offer, do not go to the bank that is closest to you, this tactic may prove fatal even if you have sufficient creditworthiness.
3. Repay existing liabilities
A good idea to increase creditworthiness is to liquidate and pay off the credit cards you have used so far. You should also look at any account limits. If we have them, it is worth reducing them to a minimum.
It is also worth looking into other loan commitments that you use, and you have not yet repaid. The consolidation loan option, i.e. transferring loans to one bank and paying off the entire liability with one installment, can help here. Usually, this is much more beneficial than paying back loans separately.
4. Check the bank before you make an offer
Be careful when submitting inquiries at the bank, as these are often associated with checking at the Credit Information Bureau. Many such queries can affect your scoring.
5. Prepare a high own contribution
A higher down payment will give you a lower total loan cost as well as a lower interest rate and a smaller monthly installment. If you can afford it, you should save at least 20% of the property value. Remember that it does not have to be only cash – banks accept as their own contribution also other owned real estate, funds from state programs or money set aside for IKE or IKZE.