Taking a loan involves important decisions and parameters that we carefully analyze and check. This decision is associated with a commitment for up to several years. But what should you do to get this loan ? What conditions should be met? You hear about creditworthiness many times, but what exactly is it? Is it necessary to meet it if you are planning to buy an apartment, car or dream holiday? Is it the same as creditworthiness and how to properly assess it? We will try to answer all these questions now to enable you to take credit for your goal or dream.
Credit credibility definition
The description and exact definition of credibility can be extremely difficult and complicated. The easiest way is to present it on an example. Let’s imagine that we have our favorite grocery store, where we make regular purchases. The cooperation so far has taken place without major problems, the amount due has always been paid, and the products themselves were fresh and tasty. One day we take a product from the shelf, which was noticed by the owner and we leave without payment. The next time we enter this store, we will be especially in the spotlight of the cashier who will not trust us again and the relationship with him will cool down considerably. That’s how credibility works. This is a kind of history of the past, which shows the credit commitments we have taken and our diligent and correct attitude towards it.
To find out what creditworthiness we have, several independent conditions must be met that have a real impact on the creditworthiness ratio.
Creditworthiness – assessment basics
Credibility is a component of several factors that are somewhat dependent on each other. How they fall out will ultimately affect the final pickup and possible bank decisions. For the full list of determinants, one must mention:
- information about the person who wants to make a commitment
- information obtained from the Credit Information Bureau – BIK
To understand the full picture, the situation indicating its credibility, the so-called creditworthiness indicator. It is rarely counted by individuals – most often this task is in the hands of the bank that examines our candidacy. The result obtained is most often translated into the probability of paying the installments on time.
Very often, along with the appearance of the term creditworthiness, the so-called capacity. As a result, it was assumed that they are synonyms, replacing each other. This is very misleading, because the distinction between them is even necessary to understand the meaning and intentions of both the first and second terminology.
- credibility shows how we committed ourselves to repayment – whether we did it punctually, and how we paid it. This is a kind of carbon paper of our past.
- ability is our ability to pay the debt. Here, our property situation, age, number of people we have to maintain, on what conditions we work (i.e. what contract we have, for how long, etc.) are taken into account.
It can therefore lead to a situation in which our credibility is high and meets the requirements set by the bank, while not meeting the requirements of capability. The situation can also be reversed – we can have a great job, perfect age and financial capabilities (i.e. ability) but at the same time obscure and not clear past (i.e. credibility).
Credibility is therefore a carbon that the bank uses and gives the first “screening” of people able to contract commitments. Of course, this is not a guarantee of getting a loan, but it is undoubtedly a significant step to facilitate this process. Therefore, it can be concluded that timeliness, diligence and meticulous repayment of obligations is a basic and significant element. Experts often recommend taking a loan (even a small one) and then repay it to build the necessary credibility. Contrary to appearances – the lack of credibility information does not bode well and does not have to involve the immediate allocation of a given amount.