Poor credit rating 2. Borrower's credit rating. What it is? Question: why do they refuse and not give a loan with good credit?

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Sberbank's scoring system has a five-point scale. For example, a credit rating of 4 at Sberbank means that the client consistently pays debts, and 5 means that his credit history is impeccable. Let's consider what role the rating plays in the final decision and what it depends on.

Borrower's credit rating

Creditworthiness assessment is the most important stage in a bank's consideration of a loan application. According to statistics, only every fifth borrower receives a positive decision.

Employees of the credit department check the documents provided by the borrower and calculate the credit rating. It is expressed in a numerical value, for example, in Sberbank it is from 1 to 5. Depending on the score received, a decision is made: to approve the loan or not.

All calculations are carried out automatically using a special scoring system. It will take 10 minutes to conduct an analysis of the borrower's creditworthiness. If the score is low, then a negative decision is made.

The scoring system has stop factors. For example, fraud. If a client is suspected of illegal transactions, a loan will be immediately refused, regardless of his place of work and credit history.

Rating level

Sberbank’s methodology includes assessing the client using a 5-point system:

1. Level I means that the borrower has a severely damaged credit history, has current arrears, or is undergoing bankruptcy proceedings. No bank will agree to work with such a client.
2. Level II - the borrower regularly violated loan repayment terms, thereby greatly damaging his reputation. A negative decision will be made on the application.
3. Level III - average rating. If the application is approved, it will be for a minimum amount.
4. Level IV - the borrower has a good credit history and has no overdue payments. The chances that the organization will approve the issuance of loan funds are very high.
5. Level V is the maximum. The borrower has an impeccable credit history, his applications are always approved, and he regularly uses banking services.

To find out your current status in the Sberbank scoring system, you must have a history of at least 1 loan. The check is available on the Sberbank website online.

Solvency indicators

When assessing the borrower and his solvency, the bank checks many indicators. After this, he draws up an overall picture of the client and makes a final decision on the application. Let's consider the main criteria that Sberbank of Russia checks:

1. Fulfillment of loan obligations. This indicator is the main one. If the client has fulfilled his debt obligations on time before, then there is a high probability that he will do so in the future. Banks will approve the application even if the borrower is overdue for no more than 7 days. It is called technical and occurs for good reasons (salary was delayed, health problems, etc.).
2. Current debt on other loans. At this point, Sberbank has a clear rule - the size of the payment on the loan issued should not exceed half of the client’s net income (all costs are taken from the salary, including payments on existing loans). The cost of raising children is also taken into account. It is easier for an unmarried person without children to take out a loan than for a married person.
3. Duration of use of bank credit services. Lack of credit history is a negative factor. The financial institution does not know how disciplined the borrower will be as a payer, so they may make a negative decision on the application. The best option is when the client repays the loan on time for 6–12 months or longer.
4. The maximum number of loans that can be repaid at the same time. The bank also places restrictions on existing agreements. For example, a borrower has only four active loans at a time, regardless of the amount of payments. Credit card obligations are also taken into account.
5. Type of loans issued. The lower the cost of the loan issued, the more difficult it is to obtain it. Personal loans and credit cards have high overpayments. It already contains possible risks of non-return. Mortgages and car loans are provided at low interest rates.

The bank must be sure that the client will repay the debt within the established time frame. Therefore, the information provided and the level of solvency are carefully checked.

How to increase

1. Get rid of existing debt obligations. Pay off small loans, close credit cards.
2. Indicate the types of income received, including unofficial.
3. Provide proof of income, even if it is not required.
4. Indicate information about the property in the form.

But the main thing is to repay loans on time. A positive credit history is the main “trump card” of every successful client. The bank will agree to cooperate with such a borrower. The more actively he uses credit products, the easier it will be to get a new loan.

I'm an ideal borrower. I am 30 years old, I have two higher educations, an official job at a state enterprise, a high salary, I own real estate, no debts, no children and dependents. There is a credit card and several closed loans without overdue payments. Now I use one popular installment card, where I have a debt of 40,000 rubles for 12 months, I pay everything on time. I have no other loans.

And with all this, the Equifax credit bureau considers my credit rating to be 55%. This means that it is better than another 55% of borrowers - that is, I hang somewhere in the middle, and Equifax estimates the probability of issuing me a loan as average. Average, Karl! I’m just wondering who you have to be then for the likelihood of a loan to be high. A sheikh with his own well? The banks are already completely screwed!

Interestingly, about a year ago I had a higher rating, but lately it has been almost constantly inexorably declining. How is this possible and how can this even be explained? I will be very grateful if you answer.

Andrey O.

Andrey, any bank would like to get a borrower like you. But do not confuse the bank assessment and the bureau assessment. Each credit bureau evaluates a borrower differently and assigns a credit rating. Banks have nothing to do with this rating.

Michelle Korzhova

financial consultant at Tinkoff Bank

Each bureau has its own criteria for assessing a borrower. In addition to information about overdue payments and the number of loans, the rating can be influenced by the client’s age, region of residence, education, marital status and many other factors.

In addition, your credit history may be stored in 2-3 different bureaus. One BKI may rate you as an ideal borrower, while another may rate you as an average one.

Why is your credit rating declining?

Given that you described yourself as an ideal borrower, your rating may have decreased for the following reasons.

The bureau's criteria have changed. Perhaps Equifax has changed something in its assessment of borrowers. Or maybe you also experienced some changes that seemed insignificant to you, but affected your assessment. Maybe at some point you had many credit products open at once? One way or another, we recommend contacting the BKI and asking what could have caused the rating to decrease.

The BKI may have received information about debts that you do not take into account. The bureau receives data on debts not only for loans, but also for alimony, utility bills, and communication services. This could be a debt to an Internet provider or a debt on some unlocked SIM card that you have not used for a long time.

Example: you have installed home Internet. The provider provided you with a modem for free on the condition that you use the service for at least two years. A couple of months later you moved to a new apartment, forgot to return the modem, and it turns out you’ve been using the services for less than two years. The provider eventually decided to sell your debt to collectors, they did not reach you by phone and forwarded information about the debt to the BKI. This is a case from real practice.

If you have a question about personal finance, credit history or family budget, write to: [email protected]. We will answer the most interesting questions in the magazine.

Company Experian creates a credit score that evaluates—ranging from 300 to 850—your creditworthiness and how it relates to your credit report. The rating is based on data from FICO and other credit history assessment systems. Thus, a score of 300 to 579 is considered “very poor,” 580 to 669 is “fairly good,” 670 to 739 is “good,” 740 to 799 is “very good,” and 800 or higher is “exceptional.”

With a score in the "exceptional" range, you can get the best loan offers. Plus, you can get 0% interest credit cards, save thousands of dollars on your mortgage, and increase your credit limit on your accounts. Here are a few steps to help you improve your credit score.

1. Find out general information

To get a credit score in the 800 range or higher, you first need to figure out where you currently stand on the FICO score. Once a year, you can request a free annual credit report from three of the leading credit reporting companies in the country. If you find any problems in the report from Experian, Equifax or TransUnion, you should take steps to solve them.

2. Build a long credit history

Lenders typically rate borrowers with short credit histories as higher risk. To get an 800 credit score, you need to build a long credit history. So keep your old accounts, even if they have a zero balance and you no longer use them.

3. Pay your bills on time

When it comes to improving your credit score, payment history becomes a very important component. By paying your bills later than they are due, you will reduce your overall score on your credit score. Use the automatic payment service, then the necessary payments on your bills will be made on time.

4. Reconsider using credit cards

Thirty percent of your credit score is made up of your credit utilization ratio, which is your debt divided by the body of your credit. Typically, you want a credit utilization ratio of 30% or less, so if you have a credit card with a $1,000 limit and you have to pay $300, you're at the limit. If your debt increases, it could negatively impact your credit score.

5. Diversify your accounts

Diversifying your accounts can also help strengthen your credit score. This doesn't mean you have to open 10 different accounts. This means that you should divide your loan into different needs, for example, a mortgage loan, a student loan, car or card loans.

6. Cut costs

One of the steps that can bring you closer to the coveted 800 credit rating points is proper budget allocation and cost reduction. Even though your income does not directly affect your credit score, still try to live on what you earn. Try to cut down on unnecessary expenses, such as expensive food or cable subscriptions you rarely watch.

7. Do not act as a guarantor for other people’s loans.

If you take responsibility for someone else's loan, you run the risk that the person you are guaranteeing for will not be able to service their loan, and this could affect your credit score. If your goal is an “exceptional” credit score, then try to avoid this responsibility. Also, promptly inform your bank about lost or stolen credit cards. If you don't do this on time, you risk being held liable for unauthorized purchases, which will also lower your rating.

8. Limit the number of hard inquiries you make on your credit account.

When you—or someone else—submits a request for credit information, it does not affect your credit score. A soft request includes information such as checking your credit account status, allowing a potential employer to check your credit history, and companies checking your credit limit. A hard request refers to information the company requests for your mortgage or card loan. Try to limit the number of such inquiries as it directly affects your credit rating.

Any lending program, in addition to the obvious profit, also brings financial institutions a “headache” associated with the process of returning the money lent. In order to minimize risks and ensure a high-quality loan portfolio, banks are forced to analyze not only the identity of the applicant, but also the degree of his trustworthiness. As a result of such analytical actions, an indicator of the integrity of the potential borrower is formed, which is called a credit rating.

Borrower's credit rating - what is it?

The borrower's credit rating is made up of a combination of numerous factors that may indicate the client's creditworthiness and financial predictability or deny such qualities. Evaluation of these indicators allows us to draw preliminary conclusions about the quality of debt servicing by the future borrower. In Western countries, a similar technique is called when a special computer program makes complex mathematical calculations (forecast), and as a result of its work produces a scoring score, which, in essence, is a credit rating. For more information about the scoring score and how it is interpreted depending on the calculation method used, see.

The main method for calculating solvency indicators is based on a rating based on the credit history (CI) of the borrower. It is commonly called credit scoring. Socio-demographic factors are often taken into account: age, marital status, length of service, place of residence, place of work, income level, etc. These are indirect indicators that reflect a person’s financial condition. A rating based on socio-demographic factors can be used, for example, if the borrower does not have a CI. This method can be found under the name: borrower scoring.

Many banks and microfinance organizations use both methods simultaneously, i.e. calculation of the borrower's credit rating will be based on his CI and personal data (socio-demographic factors).

Why are all these ratings needed if you can find out the borrower’s CI, which will show all his solvency at a glance? The fact is that the rating (scoring) is calculated in a matter of minutes, and such a calculation costs much less than a request for a credit report (a form for providing CI). For example, if we take prices for individuals. persons, then calculating a credit rating (hereinafter, KR) costs 300 rubles, and requesting a credit report will cost about 1000 rubles. In addition, an employee of a financial institution must spend a decent amount of time analyzing the CI (he must be a specialist in this field), and the CI produces a ready-made solution in the form of a number, which the employee compares with a set threshold. If the CR is below the acceptable threshold, then the client is given a refusal, and if it is within the allowed range of values, then an approval is given.

Actually, the CD is useful for all people who lead or are planning to lead a “credit life” to know. Low CR scores will signal a problem in your credit history and provide an opportunity to correct it in a timely manner.

Credit assessment procedure

Initially, the bank's security service checks all provided documentation for its authenticity and legality. If a decision is made to admit the project for consideration, an assessment of the potential borrower is carried out. It takes place in 2 stages:

1. All information received from the applicant is entered into a special banking program, which processes it in accordance with the algorithms embedded in it. The data can also be processed by a third party with which the bank has a contractual relationship, for example, in the BKI (credit history bureau). BKIs not only store credit histories, but specialize in their processing (scoring) - compiling credit ratings. In addition to personal data, the client’s credit history can also be analyzed at this stage. The result of the verification will be the assignment to the borrower of a certain level of integrity and financial stability.

But such machine processing of information often produces biased results. After all, the program works according to a strictly laid down scheme and cannot take into account all the nuances. That's why there is a second stage.

2. Bank loan officers are included in the assessment work. By studying the received rating indicator, the package of documents provided by the applicant and talking with the client personally, they formulate their own, more vivid, image of a potential borrower. They have the power to make small adjustments to the final indicator of the client’s responsibility and financial stability. By the way, in banks the decision to approve a loan can be made by a specialized structure -.

It is worth remembering here that the final decision on lending to the applicant (or refusal to do so) does not depend 100% on the borrower’s credit rating. The bank has the right to refuse without explaining the reasons. And what grounds he had for this is a sealed secret. In MFOs, creditworthiness assessment is more simplified. They are content with analyzing the borrower’s rating, which is done quickly, since the speed of issuing microloans is the most important competitive advantage of any microfinance organization, especially those issuing online loans via the Internet.

Principles for forming reliability indicators

1. Maintenance of monthly payments. Here we are talking about the uniform and timely payment of the required amounts of money to pay the loan and interest on it. If there are repeated failures of this frequency, the rating value will tend to zero. At the same time, credit inspectors will be able to adjust the number of points assigned upward, provided that the delays were insignificant in amount or time or arose contrary to the wishes and capabilities of the borrower (a banking error that is not taken into account by any bank accountants). In addition, the method of repaying overdue debts is also taken into account - at the borrower’s own request this was done or through the courts. This is the most important factor from which the CR is formed. Its share as a percentage when calculating the CR is approximately 35%

2. Current debts on credit obligations. Any debt the client has at the time of submitting the loan application is taken into account. The presence of existing delinquencies has a negative impact on the final rating. This is also one of the most important indicators, the share of which in the final rating calculation is up to 30%.

3. Length of credit history. The duration of the borrower’s CI or his credit experience plays an important role (15% of the total share).

4. Types of loans taken. Agree, any microloan is much easier to repay than a multi-year mortgage or the same car loan. Therefore, when assessing reliability, the “weight” of the loan taken is taken into account, i.e. the terms for which the applicant’s previous loans were issued. The longer the term and the more systematic the repayment, the more rating points you can earn. The borrower is then more predictable in the eyes of the bank. At the same time, early fulfillment of obligations does not play in the client’s favor, but is regarded as a negative factor for the bank (10% of the total share).

5. Frequency of requests to a credit institution. Any application for a loan to a bank or microfinance organization will be reflected in the applicant’s CI - this is regulated by law. Credit histories record not only the fact of issuing a loan and the process of repayment, but also the number of requests for a loan. Accordingly, the more often such requests were made, the greater the number of times the client applied for a loan. And if there is no information about loans issued in history, then the question arises - why was this applicant denied? This means there is reason not to trust. In addition, too frequent applications for loans indicate a citizen’s impulsiveness, his inability to plan expenses and a very difficult financial situation. The share of this indicator is 10% in the calculation of the KR.

As a result, the final rating value is calculated by summing each percentage:

• 65 – 100% - good credit scoring, characterizes the good financial condition of the borrower;
• 35 – 64% - average solvency ratio. Financial institutions are more wary of such a borrower and may worsen lending conditions (for example, increase the interest rate and reduce the amount and term);
• 0 – 34% - low rating, almost one hundred percent refusal due to poor solvency. There is a high probability that there will be arrears on current loans. In this situation, it is necessary to take all possible measures to improve CI.

The number of loans that are currently issued in the name of the borrower also has a significant impact on the level of the rating bar. An increase in credit burden is regarded as abuse of debt obligations and an increased risk of debt becoming overdue. After all, having several loans, you can simply get confused and unwittingly miss the next payment. And the burden on the total family income will be higher than permissible.

The bank also doesn’t forget about credit cards. Their number and the amount of established limits are also taken into account when assessing the borrower’s reliability. At the same time, using only part of the limits is considered a positive factor - this indicates your prudence, thriftiness and ability to plan your spending.

Ways to improve your rating

1. Most banks, at the stage of processing loan documentation, offer borrowers to choose a repayment date that is convenient for them. Select the day after your salary is paid. Then you can pay off your debts first, and distribute the remaining amount for everyday needs.

2. It is advisable to get a loan from one financial institution.

3. Maintain lines of credit even after paying off debt. An existing loan with no debt (even current) is your main trump card. This mainly applies to credit cards - we have paid off the debt, but we don’t close the card, so be it. Constant turnover on a credit card, coupled with timely repayment, is assessed positively by the bank when considering a loan application.

4. Reduce credit card debt whenever possible. Let the established limit not be fully selected.

5. Use the services of banks or microfinance organizations that offer programs to correct your credit history (). And some organizations specialize in this service, for example.

Let us remind you that you can check your CI once a year for free. Don't neglect this opportunity, because mistakes happen there too. There are often cases when the borrower’s history turns out to be loans that were not his at all, and even in arrears status. And the bank refused the client... It's a shame, isn't it?

Ratings, by and large, are not assigned, but earned. With your exemplary behavior, prudence and commitment to repaying debts, you earn yourself good reliability indicators in the future. The borrower's credit rating is your business card. And the possibility of your lending in the future depends on what is written in it.

With bad credit, you may have difficulty getting things like loans, credit cards, and store cards. It can also negatively impact your chances of getting a mortgage on your dream home. There are many ways to improve your credit score, and the best place to start is with this article!

Steps

Homework

Get a credit card if you don't already have one. If you don't have a credit card and have never provided collateral for a loan, your credit score will be 0 (but in a good way). Because credit card companies and credit reporting agencies don't have information with which to make an estimate of your credit score. You are like a dark horse to them. You may or may not be a reliable borrower.

Get a free copy of your credit file online. There are many websites where you can get it. You are also entitled to one free report per year. Make the most of this opportunity! Just search for the three major credit rating agencies (TransUnion, Experian, Equifax) using any search engine and you will find a ton of places and ways to get your credit report in hand.

Take a good look at your credit report for obvious errors. Even small mistakes can have a big impact on your credit score. Therefore, if you find inconsistencies, take immediate action to correct them.

• Find the records of small credit and collection agencies in the report and contact them. Ask them to provide evidence that the overdue payments belong to you and are processed according to the details you provided. There is a chance that smaller companies will not be able to provide you with this information and you will have the opportunity to ask them to remove this information from your report. This will immediately improve your credit score.
• The same applies to companies that have merged with other companies or liquidated companies. If the information you request cannot be provided for one reason or another, you can request that the relevant entries be removed from the report and thereby improve your credit status almost instantly.

1. Get a reasonable loan if you know you can repay it. About 10% of your rating is made up of the so-called “cocktail of accounts”. In other words, the number of available loans and credit accounts. If you take out a small loan and pay it off quickly, you can improve your credit scores.

   • However, if repayment will take you several months and/or years, don't bother with it. Interest rates can eat up your cash, which will only make it harder to pay off your principal. Take out a loan only if you are 100% sure that you can pay it back.

2. Start using your old credit cards again. If you have credit cards that you no longer use, your creditor may simply decide to stop reporting your account status to the credit bureaus. This isn't so bad until you realize that accounts with a longer history actually improve your credit score. So get out your old credit card, make small recurring payments, or use it to buy movie tickets every now and then. Pay off your debt in full every month.