The credit worthiness of individuals varies depending on several factors. The bottom line, however, is the capacity to pay. This can be measured in terms of income, net worth, collateral, previous credit records, and type of profession or business.
Banks and other lending companies may categorize loan applicants based on the level of risks involved. Some professions, jobs or businesses are relatively unstable to be worthy of large loan grants. Others are too risky to even be granted any type of loan. Obviously, those who are out of jobs or merely starting their businesses are considered as high risk applicants even if they can provide collaterals.
Hence, it is crucial for would-be borrowers to have honest self-assessment of their personal credit worthiness. This will significantly help in facilitating the application process and will also reduce the probability of rejections and eventual frustrations.
The ancient adage, "know thyself," can be considered as the first rule when applying for credit lines. Individuals must first identify some of the factors that could affect their credibility as borrowers. Records of defaulting or totally abandoning loan obligations, no matter how trivial, are typically red flags for lending institutions that can prompt them to deny the loan application of an individual.
It does not matter if it is large business loan or standard credit card approval an individual is applying for. The same basic rules are applicable regardless of the amount of loan application. It might be more difficult to secure large loan grants as compared to ordinary credit card approvals but there are some simple practices that can increase the probability of being approved.
Pay on time
The records about payment history about utility bills and other recurring financial obligations are basic factors in assessing credit worthiness. If you religiously pay bills on time, it implies that you are a responsible and well-organized person. If you have become delinquent on some payments, strive to update your payments and make them current.
Lenders will initially assess your application based on your bill payment history. The modern digital age makes it easier for lending companies to check your bill records. For instance, if you were blacklisted by a mobile service phone provider, your chance of getting a loan approval will be very low. Even seemingly trivial records on subscriptions such as magazine subscriptions can affect the overall credit standing.
Credit card discipline
Avoid over-stretching your credit limits or impulsively using credit cards for unnecessary purchases. Credit cards are convenient but they should not be abused. It is also important to stay with just one or a couple of credit card companies than keep on transferring from one company to another.
Remember that credit card records are very easy to check. If you cannot avoid defaulting on some of your credit card obligations, try to consolidate or restructure your debts for more favorable repayment schemes.