Creditworthiness is often the sentence when we want to take a bank loan and we do not know if it will be allocated to us. It is up to her to receive a future loan. Many people, however, unknowingly apply for loans, providing all the information and leaving the decision in the hands of the bank.
However, there are several ways to increase your credit standing and influence your credit chances. So how do you increase your credit standing? What do we need to remember? Is this difficult? Answers, useful tips and tricks are presented below.
What is credit standing?
Creditworthiness is a juxtaposition of our earnings and financial possibilities with expenses and an assessment whether we can pay the next liability. It provides the bank with answers as to whether the new loan and installments will not be too heavy for us and whether it can grant us such a loan. Based on information about our financial standing, each bank makes individual decisions, although most banks follow the same standards. Our creditworthiness is affected by many factors such as
- type of employment contract
- current commitments
- amount of monthly installments or credits and loans held
Credit cards and account limits
Closing credit cards and account limits is the first way to increase our credit standing. Many people forget about this fact, willingly acquiring new credit cards or opening account limits “just in case”.
These banking products are treated as an open loan, which means that we may have some problems with taking further loans, e.g. cash or car loans. It is therefore worth replacing the credit card for a debit card – if we like to pay without cash or close the account limit and applied for it, if we really need a flexible loan.
Unpaid liabilities – consolidation
An element that may affect our creditworthiness is the repayment of open liabilities. If we can, we should pay the last few installments of another loan and close it. This will reduce your monthly installments and thus significantly reduce your monthly expenses.
If you do not have such a large amount to pay back your liabilities, it is worth consolidating loans and credits. If we care about a new loan and are able to pay an additional interest rate, we can reduce our monthly installments by up to 50%. The bank that grants us a loan draws attention to the amount of monthly expenses, much more than the length of these obligations.
Fixed installments instead of decreasing ones
One of the underestimated ways to increase your credit standing is to choose installments in your new loan. It’s definitely worth choosing the fixed ones, not the decreasing ones. By examining our creditworthiness, the bank compares our droppings with the first installment of a new loan.
In fixed installments it is the same throughout the entire loan agreement. In decreasing installments – the first installment is much higher than the average and falls to be a very small sum at the end of the loan. It is therefore worth choosing fixed installments, because thanks to which we will receive our loan or a larger amount.