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Would You be Your Own Lender?
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by: stickystebee
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Want to find out if a loan officer would consider you a worthy credit risk? Although their guidelines differ from bank to bank, most loan officers will base their judgments on a series of weighted questions. When the values assigned to the questions are added up, the loan officer will compare it to an internal scale used by that lending institution to determine if you will get the loan you request. What are some of the more important considerations? Firstly, how many years have you been on your present job? The prevailing wisdom is that people who change jobs frequently cannot keep steady jobs, and therefore are poor credit risks. In today's economy, that picture has changed, however, banks lag behind in understanding social mobility, or that your job may in effect be multinational, especially if you work at home and your employer is overseas. For the self-employed, this becomes doubly difficult and some may be forced to consolidate debt.
Next up is your monthly income level. This will vary, obviously, from country to country based on standard of living. The factor a loan officer is likely to look at here, assuming you meet their minimum monthly income level, will be how much you want to borrow with respect to how much you currently take home each month. Along with that, the present obligations past due that you are holding and the total monthly debt you carry compared to net income will weigh heavily in their decision.
It will help if you have had a prior loan with the lender and successfully paid it. Also, if dealing with a bank, if you have your checking account there (with no bad checks drawn against it). Other factors they will weigh can seem trivial: how long at your present address, how old is your newest car, do you have a savings account, do you own real estate. All these things go into building your credit rating. By taking an assessment yourself of these factors, you can determine whether a bank in the business of loaning money will see you as a good risk. Much of this process of course is dependent on whether the bank is lending at that time. Credit availability goes in cycles. During times of availability it is easier to get loans. In harsher economic times, such as today, banks are reluctant to lend no matter how good a risk you are. The loan officer will add up all your points and decide based on the bank's current policy.
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The prevailing wisdom is that people who change jobs frequently cannot keep steady jobs, and therefore are poor credit risks. In today's economy, that picture has changed, however, banks lag behind in understanding social mobility, or that your job may in effect be multinational, especially if you work at home and your employer is overseas. For the self-employed, this becomes doubly difficult and some may be forced to consolidate debt.
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