A good credit history is your letter of presentation when you apply for a car loan, a mortgage or a personal loan to solve home emergencies or go on vacation.
There are many loan products out there, but not everyone gets a credit approval from a bank. When this happens, we ask ourselves why.
Possible reasons for denying a loan include the following:
- Not having a regular job.
- Insufficient income to repay the loan.
- Affected credit history (late payments or not paying off previous loans).
- Not enough time in your current address.
- Low down payment.
To approve a loan, credit card or mortgage, banks consider the following criteria:
- Character: It alludes to a person who is financially serious and stable. It also considers the length of time you have been in your current job and address. These factors give confidence to the lender.
- Capital: The cash you have in your savings account and properties, such as a house, car or investments. If a bank gives you a guaranteed loan and you do not pay it back, the lender could use your properties as collateral or warrantees to repay the loan. When you use a credit card to buy merchandise, the lender is giving you a non-guaranteed loan.
- Capacity: It determines if you have enough discretionary income to repay the debt. Having a regular job with a stable income is essential when applying for credit. Keep in mind that the lender will evaluate your whole financial scenario, by evaluating your income and debt to determine if you have the capacity to repay.
- Credit: If you already have a credit card or any other type of loan, the lender will take into account your payment history and the amount due.