November 11, 2019

Creditworthiness – definition, how to calculate it, calculator

We often come across the term in which we learn that our creditworthiness is low or insufficient. This sentence does not always seem clear to us and leaves many questions. What exactly is this creditworthiness? What is it about and does it have a real impact on something? While the concept of ability is not foreign to us, the financial context may be unclear. Does ability really affect the loan and can it close all our paths?

 

What is credit standing?

What is credit standing?

A customer’s creditworthiness is an assessment of his ability to pay off a contract. Simply put – the chance or the ability to pay the whole amount, including interest. It is important that all repayments take place in a timely manner. Assessing this ability is a complex process, mainly based on documents and information gathered about you. So you are a book, full of historical facts that determine whether you inspire confidence. The Banking Act does not, however, set exact criteria and methods of assessment. Therefore, it is possible for each bank to interpret it in its own way.

 

Creditworthiness assessment

credit problem

So what really affects your creditworthiness, which can affect the acquisition of the loan you need?

  • the most important is monthly income, and therefore a steady cash flow that will contribute to the possibility of monthly fees
  • fixed monthly charges – of course, budgetary charges. The more obligations the worse for creditworthiness – installments, car fees, rent, maintenance – all of this matters in the end
  • free client funds, i.e. the amount that remains after payment of existing liabilities, which can be transferred to repay credit obligations.
  • reliability – that is timeliness, honesty and attitude to existing, previous credit obligations (mainly towards banking institutions).
  • record – from age, sex to marital status and education. The stability of the place of residence is also often important
  • other – creditworthiness is increased and assessed individually, depending on the bank, currency, loan period and many other factors that affect the repayment of installments.
  • submission of documents – often a forgotten aspect, but also one that has real significance. Only a correctly submitted application, together with all necessary documents, can be considered by the bank.

 

Creditworthiness calculator

Creditworthiness calculator

Creditworthiness is assessed and calculated by the bank. Each of them has its own internal counting system, but we can create a simulation of this ability. Currently, creditworthiness calculators are available on portals and websites of various colors. Thanks to the results we get a hint regarding information and necessary elements that we need to prepare when going to the bank. The calculators also show an approximate capacity that may coincide with what the bank will tell us.

 

PKO creditworthiness

PKO creditworthiness

A good example is the creditworthiness calculated for e.g. a PKO bank. For example: deciding to buy real estate, in equal installments, with a 10% own contribution, and the necessary amount of 250 thousand, we get a full list of installments in the coming months. On this basis, we can determine whether this amount exceeds or is within our financial capabilities. Of course, it is worth considering several calculators that will give us the best and the most optimal. In the case of the PKO bank, a direct form is also available, through which one can contact the bank directly regarding questions in this field.

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