Creditworthiness and credit registers – two scarecrows on the credit market
Nowadays it is clear to anyone who wants to borrow some money, whether from a bank or from one of the many non-bank entities operating in our market, that without having to check it out, they simply do not borrow it.
It’s quite logical. Creditors, whether they are banks or non-bankers, must have enough information about you to be able to evaluate whether they will get their money back with or without interest. They simply need to evaluate whether you are a too risky client.
If you find yourself in this category, your chances of getting any loans are falling sharply. It does not necessarily mean a hopeless situation, but if the lender also lends you, you have to assume that the RPMN, which talks about how much you actually repay the loan, can be really high.
How is the creditworthiness assessed?
Let’s put it straight: these are really hated terms, but all creditors without exception – both banks and non-banks – complain about them every time you try to apply for a loan. What do we have in mind? Creditworthiness, solvency, or credibility. All these words mean one and the same from the creditor’s point of view.
The point is that you need to figure out how much you earn and what your monthly expenses are. Based on this information, he can accurately and objectively evaluate whether you are a “creditworthy” or “solvent” client, and therefore whether you will have enough money to smoothly repay your loan.
You may now say, okay, it shouldn’t be a problem if I repay the loan, it just goes to zero! But the truth is a little more complicated. In order to qualify for a loan, it is not enough that the result you receive if you deduct your expenses together with the loan repayment from your income is zero! In fact, you have to keep at least a minimum subsistence amount in your account every month, which is currently EUR 198.09 (valid until June 30, 2016)!
However, other factors such as your age, gender, degree of education, type of employment, marital status as well as your credit history also affect the final assessment of your creditworthiness.
Oh, those unfortunate credit registers…
This sigh is frequent and to some extent it is necessary: even the information stored in the registers affects the final assessment of your creditworthiness, and it must be said that it is very important! On the other hand, they need not be seen only in negative light. Their task is to collect information about clients of banks and non-bank institutions who have taken out a loan in the past, or they are currently taking credit and their payment morals (that is, whether the repayments are paid in agreed amounts and on time).
On the basis of this information, creditors have the opportunity to thoroughly and objectively assess the ability of clients to pay their credit obligations in the future. In a word, they are an important filter of possible “defaulters”, which they also protect for the ill-considered decision to take out a loan, even though they do not “have it”. They are therefore an effective barrier to disproportionate and excessive “overturning” of citizens.
There are several credit registers in Slovakia, some of them have all the information in relation to loans, but there are also those that you can only get to if you are late with repayments, so they are used to talking negative registers. In principle, however, we can talk about two types of credit registers – one of them writes the bank’s data, the other one the non-bank companies.
In the past, these two types of registers have been segregated, but today banks and non-banks have the same access to information on your payment morale.
What do lenders see in registers?
- What credits you took in the past and when you paid them off
- Whether you paid them properly, in agreed amount and in time (= your payment discipline)
- What loans are you currently paying
- Total credit agreements (including bank overdraft or credit card allowed)
- How much you still have repayments and how much until full repayment of the loan
- Whether you guarantee someone to repay the loan or act as a co-debtor
- What do you do with current and what you have to do with past loans (such as bill of exchange, house, car….)
- Have you ever been denied a credit request by a creditor and why
The criteria for assessing creditworthiness vary from provider to provider
However, the coin has always two sides, and otherwise it is not in this case either. It is often the case that all the other criteria that are important in assessing your creditworthiness are fulfilled so to speak, but because in the past you have not been insolvent for a short period of time and have been delayed in repayment then the lender will categorically reject your loan application!
It often happens that there were really minor problems that you have long since gone, and that your financial condition is now at a decent level. However, registers are uncompromising: they keep you informed for the duration of the credit contract and then for another 5 years after it has ended.
So, in practice, this can easily happen: if you ‘met’ for a repayment, say 8 years back, and since then you have been one of the best clients with excellent payment discipline, the registry entry will still make you an inappropriate candidate for loan approval.
This situation most often occurs when you apply for a loan in one of the banks. These are governed by very stringent rules when assessing their clients in terms of credit risk (also referred to as client rating) and only reluctantly enter into a credit relationship with clients who have low incomes and, in the past, when they violated installment calendar.
The criteria for assessing your creditworthiness are not strictly defined by law, which means that each lender, whether it is a bank or a non-bank company, is set a little differently.
In the competition for greater friendliness in this respect, the non-banknotes that are known to be able to “eye-blink” even the seemingly hopeless case are clearly victorious. Even so, it is true that in a single loan company you may fail with your application, but in another you borrow you without major problems.
TIP: If your solvency and “sinless” past do not seem to be the most sophisticated, don’t waste your time with the banks, you will save unnecessary nerves and disappointments. Apply for a loan by completing our online form and experienced financial advisors selected by leading non-banking companies will take your situation with you over the phone and offer you the most appropriate tailor-made solution for you.
Loan rejection may not always be reported to you!
In addition, non-bank companies are known to not always use their “privilege” even though they are authorized to view credit registers. There is a common scenario where your payment morale is not verified, or if so, they do not immediately take any information about your past difficulties in repaying some other loan than the previously signed “loan is denied.”
The hope that you will get to the money that the bank would not simply give you has a clearer contour for the non-bankers. However, despite all the optimism, of course, it may happen that they do not tap the loan here.
If you are one of those unfortunates whose non-bank credit rating has been found to be insufficient to obtain a loan, there is no need to hang your head and try it through another loan company that can eventually satisfy you. However, it is important to know that if a non-bank loan does not approve your credit, it will not inform you at all.
Indeed, only banks are obliged to do so by law, who must tell you not only that they have denied your credit, but also give you the reason for this negative opinion. Non-banking companies are not covered by banking legislation, so this obligation does not apply to them.
And it has to be said that some of them use it properly. Then it often happens that a client who has applied for a loan online is just waiting for the company operator to finally hear it and nothing happens. The phone just remains deaf!
However, this happens more often with smaller non-bank companies. The larger, solid ones that have been operating in our market for several years, are mostly paying attention to this, and even though the law does not oblige them to inform you of the reasons for the refusal, they will contact you and at least give you a fair notice that you are with your request they did not come and explain why.
But you can’t rely on it 100%. If you want to know more, also read our next article explaining why non-bank companies sometimes don’t respond to your request and why fast loans may not always be that fast.
A Brief Summary – What Does It Affect to Assess Your Creditworthiness?
- The difference between your income and expenses
- The degree to which you are charged (how many additional loans you are currently repaying)
- Your past credit repayment discipline – “misdemeanors” greatly reduces your credibility and increases your risk as a client
- Payment morale in respect of compulsory social and health insurance levies (applies to sole traders) – if you have arrears, this often results in a refusal of the loan application
- Your education and current employment
- Age, gender and marital status
Credit registers are to some extent a double-edged sword. On the one hand, they protect you from letting you borrow money without having to be sure that you will be able to repay them in the future.
On the other hand, they can cause you a lot of trouble and shuffle the cards so that even if your other solvency indicators show you in your favor, any negative record of your repayment discipline will cause you not to get the loan.
This is especially true for banks, but the truth is that even non-bank companies are used to checking their clients and not just borrowing anyone. But they know how to “narrow the eye” and also approve a loan that the bank would resolutely reject! Although they may reduce the total amount of principal (that is, the amount you borrow), they may require some form of guarantee from you, but at least they will lend you and not turn your back on you.
Especially for non-bankers, therefore, as they are so benevolent in assessing your creditworthiness, the main burden of deciding whether to borrow or not is up to you. You yourself have to consider whether a loan is necessary or not and whether the risk associated with it is higher than the total benefit in the form of the money you get from it.
TIP: If you have considered for and against and decide for a loan, fill out our short online quick loan form within 24 hours and you can be sure that you will get the product exactly according to your requirements. Without excessive scrutiny, lengthy bureaucracy, and endless waiting for approval. Money will appear in your account for the second day!