April 30, 2018
You would like to obtain a loan and want to put all the chances on your side? You should be aware of the four (4) main factors that a lender will analyse to make his/her decision.
1st factor: Your debt ratio
The first factor taken into consideration is the level (or ratio) of debt, which is calculated in terms of a percentage. It is the only factor that takes into account your income and your actual reimbursement capabilities. Maintaining a debt ratio of over 40% is considered problematic, whereas a level of 30% or less is considered excellent. We invite you to calculate, free of charge, your debt ratio here: assess your situation.
2nd factor: Your credit score
Your credit score is awarded to you by Equifax and Trans-Union on a scale of 300 to 900. The closer you are to 900, the better the score. Your score can affect the lender’s interest rate for a loan for credit line.
3rd factor: Your credit rating
The most known factor is the credit rating. It varies between 1 and 9 and is established by each of your creditors. It measures your repayment habits for each of your debts. A rating of “1” indicates that you pay in less than 30 days, whereas a “9” indicates that you are in collection, you have moved without leaving a forwarding address or your account has been sent in collection. Lenders start to worry with a rating of “3” and may refuse your loan. The rating appearing in your file will unfortunately be the worst one that you have received in the past and it will stay in your file for a period of six (6) years. You can obtain your free credit rating by visiting Equifax or Trans-Union.
4th factor: Your employment and residential stability
Lenders love stability! A creditor will be more inclined to approve a loan if you have been living and working at the same place for a while, more stability means better protection against losing your job and easier to track your down in case of non-payment.
By working on these 4 factors, you increase your chances of approval when applying for a loan. It is important to constantly keep an eye on your finances and to borrow only when necessary and make sure that you remain well within your repayment capacity.
Don’t miss our next article where we will discuss the factors that are considered to establish your score, as well as good advice to apply in order to improve your credit.
March 26, 2018
What is a credit file?
In summary, the credit file is, so to speak, the medical file of your finances: the better the healthy habits you have, the better your health will be!