If you are looking for a personal loan to achieve your inner peace but you do not know what financial institutions are based on to grant said loans, this post, we are going to explain what the credit profile is and how to have a good profile.
What is a credit profile?
A credit profile is the rating that financial institutions give you when applying for a loan, this score predicts a person's ability to pay and the fulfillment of their payments, which is based on a statistical model.
It is used through a measurement system that establishes your ability to pay.
This report collects all the financial information of a person, helps entities to know if a person can pay or not, that is why it is important to maintain a good credit profile.
How do you define a good loan applicant profile?
- Job stability of an applicant is the first thing a financial institution evaluates.
- The type of contract if it is permanent or temporary.
- They analyze the delinquent file, in which you must find yourself.
- Sector in which you work and especially if employed or self-employed.
Top factors for credit rating:
Knowing the factors underlying the credit rating models is essential for making decisions.
Payment History or Payment History: This represents 35% of your score. This shows if payments are made on time, how often you are late in those payments, the number of days from the due date and when you have been late in payments.
Loan use rate: The credit rating considers through its algorithms, that the cards that are at the limit and the credit use rates that exceed 50% are a credit risk. The higher the rate, the greater the risk.
Loan History Length - Represents 15% of your score. The longer the payment history, the higher your score. In other words, a person who has had a loan for 10 years and should never have used collateral will receive fewer penalties than the most recent credit profile.
Type of loan: Having different accounts, including well-managed mortgage or credit card loans, will allow you to have the necessary information. This represents 10% of the grade .
Credit inquiries: this factor represents 10% of the rating. It is the least understood factor.
What is the debt ratio:
As we have mentioned, the percentage of indebtedness can vary, depending on the financial institution. They typically range from 30 to 40% of applicants' monthly net income.
Simple example, payroll of about € 1,200, the loan fee could be between € 360 and € 480, depending on this it will be set at 30 or 40 percent.
If in the same payroll you accumulate other loans of about € 250 per month, the bank will perform this calculation:
Debt calculation example:
- € 1,200 of monthly payroll - € 250 other loans = € 950 of net income
- 30% on the € 950 = € 285
- 40% on € 950 = € 380
With which, according to the example, the installment of your next loan that you request must range a maximum between € 285 and € 380 per month.
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