Potential borrowers who have not previously dealt with taking a loan or always paid their other debts on time are always confident that any bank or MFI will immediately give them a new loan, if necessary. After all, they have no problems with the so-called credit history, which reflects all relationships in the past with financial institutions. But in practice this is far from always the case, and applying for credit money, you may run into the problem of why they do not give a loan if there is no good credit history or credit history at all (that is, you have never had to take loans at all before).
How do you know if you can count on a loan or not?
Many potential borrowers naively believe that if they had never taken loans before, then, with such a zero credit history, without delay in old debts and problems with repayment of loans, they will be provided with any loan from a bank or MFI. But, unfortunately, for banks, a zero credit history of a potential borrower is just as undesirable as a bad credit history. Those who have never taken a loan are considered “dark horses,” and therefore the bank commissions that make the decision to grant a loan can be denied to those whose loans are pristine. Of course, this is very unfair, but the fact remains that it is much easier for such a borrower to take a microloan from a credit company, for example, by contacting the MFI “rather than waiting for weeks for a decision from the credit commission at the bank.
If you know for sure that in the past you had problems with repayments, and, moreover, there were overdue loans, then this means that you have a bad credit history. If you want to lose time waiting for a loan, having problems in your credit history – contact the bank. The likelihood that you will lose time and not get the expected loan is too high. But a bad credit history for MFIs is not so critical – in this situation you can try your luck, since credit scoring (verification) in microfinance organizations is more loyal to potential borrowers.
For what reason they do not give a loan with a good credit history?
There is such a situation: earlier loans were taken at banks and MFIs, paid regularly, there are no debts, and your data are not available in the databases of credit bureaus. This means that from the point of view of bank clerks, you have a good credit history. But, unfortunately, even a hassle-free credit history is not a panacea – you cannot be sure that such a loan you need will be approved by the bank. But why does the bank not give a loan with a good credit history? After all, it would seem that you can be 100% sure of such a borrower.
We previously mentioned and wrote about such a procedure as credit scoring. Credit scoring is a software check of your data, during which your financial reliability is checked. This independent computer check is based on credit history data, your income, but that’s not all. All the problems associated with the fact that you were not given a bank loan, even despite a good credit history, are related to the fact that scoring studies the social side of the issue. That is, the program studies not only you, but also your place of work, place of residence, affects information about family members, close and distant relatives, and even takes into account information about colleagues and friends.
Suppose, among your relatives, there is someone who did not pay on time with the debts in one of the banks. Incredible, but true: you can be arbitrarily financially reliable, but in your environment there are those whose credit history is not so perfect. And therefore, a computer check can make a formal conclusion: you can proceed with the payment of debts in the same way, that is, violate the agreement with the bank. Perhaps this is unfair, as it makes you a hostage to the way your co-workers, friends and relatives behave as borrowers, but the credit commission at the bank in this case will adhere to the implacable conclusions of scoring, and, most likely, will not provide you a loan. You will have to look for additional opportunities, how to convince the bank of exceptional financial reliability (provide very powerful guarantors, promise a generous pledge) and wait again. For those who need to resolve the issue urgently, it is better not to take a chance: