CreditforForeigners.pl - mortgage in poland for foreigners » Credit analysis, or how do banks check loan applications?

Credit analysis from the bank's point of view is a series of activities that must be performed in order to positively or negatively evaluate a loan application. On the other hand, from the point of view of a customer interested in a mortgage loan, these are many hot spots that may decide about obtaining a loan or a negative decision. You can prepare for a credit analysis to some extent. Proper preparation will eliminate some or all of the threats. I hope that my article on Credit analysis, i.e. how banks check loan applications, will help increase your chances of obtaining financing. From today's post you will learn:

what is the basic breakdown of analyzes in the bank,
how banks analyze your income,
credit history - how important it is,
do banks check social media,
what is bank scoring.

1.Basic breakdown of credit analysis

In almost every bank, checking the complete documentation for the loan is divided into 4 main sections:

personal analysis,
economic analysis,
legal analysis,
real estate analysis,

1.Personal analysis

Personal analysis is primarily checking your household in terms of the number of people, credit or other burdens (e.g. alimony), age, and legal status.

2.Income analysis

One of the basic assumptions of checking a loan application is the assessment of creditworthiness. The bank must verify that your income is stable and that it allows for proper payment of the future loan obligation. You need to know that banks have their own income acceptance rules. Not all types of income are treated equally by all banks. There are major differences between the various institutions. The fact that a given bank positively assesses your ability at a certain level does not mean that other banks will assess it similarly. Banks can also value ability very differently. I have encountered the situation of the same client many times, when the differences between banks were in the range of several hundred thousand.

3.Legal analysis

In this part, the bank checks all the documents, legal situation, preliminary contract, developer and other issues that may, from the legal side, hinder the execution of the transaction. Credit analysts are very scrupulous about this section. If, in their opinion, the bank will be exposed to risk, the negative decision will be quick and simple.

4. Real estate analysis

In addition to the individual assessment, the bank will analyze the property. Banks check the market value of the collateral through a valuation provided by the client or commission it themselves. The type of property is also important. There are types of real estate banks are not interested in. Several times in my work, I was refused a loan because, according to the bank, the property purchased by the applicant was located on a not very liquid market. The bank was afraid that in the event of taking over a house, plot or apartment, it would have problems with the quick sale and regaining its capital.

2.How do banks analyze their income?

Income obtained by borrowers is carefully checked. The need to provide certain documents depends on the type of income you receive. How will the bank screen you?

Contract of employment

In the case of an employment contract, you will need to provide a salary certificate. Each bank has its own printing and method of calculating income. Banks differ when it comes to accepting the period of employment, bonuses, commission and overtime. Data from the certificate of earnings are usually confirmed by phone. In the era of GDPR, employers refrain from confirming sensitive data to external entities. This will result in the need to provide statements that affect your salary. If you are paid in cash, you must know that several banks will not accept your income. For most, an alternative will be to provide a certificate of the basis for calculating insurance premiums from ZUS. With a few exceptions, PITs are usually not required.

People who own the company

It has become commonplace that people running a business have a hard time. There is something to it, unfortunately. Checking the credit application requires the provision of a much wider range of documentation than in the case of an employment contract. You certainly need to provide PIT for a year or two back. Additionally, documents specifying current income, eg KPiR, sales records. You will also not avoid the need to provide certificates of non-arrears with the tax office and ZUS

Contract of mandate and contract for specific work

The so-called junk contracts also require the submission of a broad list of documents. Banks usually check the last 12 months. From this period, you will need to provide a certificate of earnings, receipts and receipts to the bank account. You also need to prepare your PIT tax return for the previous year.

3.Credit obligations

When applying for a mortgage, you need to know that even the smallest credit obligation reduces your creditworthiness. The bank checks your liabilities on the basis of the statement in the loan application. Is compared with the BIK database, extracts and internal databases. Failure to admit obligations may result in a negative decision. If you are planning a mortgage, I suggest you avoid payday loans. Banks dislike borrowers who use private financing. Despite good repayment, the detection of a payday loan by an analyst may result in a refusal to grant a loan.

Credit history

In addition to your current financial obligations, banks will check your credit history. When analyzing the application, banks will send inquiries to BIK, the Bank Register and the bank's internal databases. It is customary to check credit history up to 5 years back. The main goal is to analyze whether you have paid your loans in a timely manner in the past. Delays of up to 30 days are accepted without major problems. A serious problem arises if you have had debts above this date. How to check your credit history? It will cost 39 PLN and will take 5 minutes!

Economic databases

In addition to the credit bases, the bank will check whether you are in arrears in paying your standard bills. If you are in arrears with your telephone, cable, tuition, tickets or other payments, you may have trouble getting a mortgage. Banks analyze information from economic information offices of the BIK type, i.e. ERIF, KRD, Infomonitor. Here, however, the matter is simpler than in the case of BIK. You can pay off your debts, and the entity that entered you must update the database within 14 days of recording the repayment.

Bank scoring

Due to the scale of operations, each bank has millions of customer data in its database. Such a large amount of data subjected to appropriate statistics allows for the assessment of the bank's risk. The result of this assessment is bank scoring. Scoring is a product of several dozen different parameters contained in the application and the rest of the documentation. Scoring is a secret, individual know-how to evaluate each client. The higher your bank score, the better your chances of getting financing. A borrower who is a notary will have a better chance than a person working in transport. A single at the age of 20 will receive a lower rating than a married middle-aged person. An applicant with income from self-employment has fewer chances than a person employed under a contract of employment. These are just a few standard examples.

4.Social media

Surprised? When assessing a loan application, the analyst will certainly check the available social media, for example Facebook. What can he look for there? He will certainly check that you write the truth in the application. If you write in the application that you do not have children, and at the same time boast about family photos from holidays with the whole bunch, you may take a negative decision into account. In a black scenario, this may result in a crime being reported. I once encountered a case where an analyst refused a loan from a client who clearly liked a quick and lavish life. It is not forbidden, but for the analyst it can create an image of a person of little importance and not paying attention to everyday duties.

Loan application

The document that sums up the entire transaction is the loan application. In the application, you will need to include information about your household, marital status, liabilities, income, real estate, loan amount, loan term and more. The data from the application must be true. If the analyst detects inconsistencies, you may receive a negative decision.

How long does the credit analysis take?

It is up to the bank to check the application and issue a credit decision. It is also influenced by the amount of work in progress. At the moment, when the market is experiencing a purchasing boom, these times are really long. The fastest banks will issue a decision in 2 weeks, the slowest ones will take up to 6 weeks. Keep this in mind when signing the preliminary contract. It is customary to recommend the time for the organization of the application, the analysis process and matters related to finalizing the loan agreement.

Summary

Applying for a mortgage is a multi-stage process. Mortgage analysis is the most complicated part. It is worth knowing what its principles are. Knowing the rules before applying for financing allows you to eliminate or even avoid weaknesses. Thanks to this, you increase your chances of a positive credit decision.

Feel free to comment. Is the topic of credit analysis interesting for you? Let me know in the comment. Will be happy to help clarify all issues. It is important to me that every topic regarding the mortgage is absolutely explained.