What is a credit analysis?

Credit analysis is a process that creditors use to determine whether the applicant should be allowed to borrow money, either in the form of a loan or for debt production. In cases where creditors are for credit, this process can also be used to determine how much loan to grant. Such processes are used to determine the fight for being individual and businesses. The purpose of this process is to assess whether a potential debtor can afford to repay the debt and whether it is likely. This determination is often carried out by a credit analyst or by a department of credit analysis analysis.

There are a number of items that are usually reviewed in the loan analysis. One of them is income. The creditor almost always wants to know about the sources of the debtor's income and the received parts. Although the debtor seems to have sufficient revenue of the amount of payments, the credit can be rejected. This is because the debtor can have too many existing debt.

Credit analysis also usually considers expenses. Creditors generally evaluate which debts Je potential debtor responsible. The debtor may have a large income, but if a large part is necessary to make payments for existing creditors, this can be considered a reduction in the chances of repayment for other creditors.

Another reason why credit analysis may be unfavorable despite the amount of income is caused by instability. The person may have sufficient sources for repayment at the moment, but maybe he has not been in his work for a long time or has a change in job changes. This can cause creditors to assess a person as a high risk of failure of his / her payments.

Credit analysis also generally focuses on payments history. Consider USUALLY creditors' habits of a potential debtor when paying his accounts. If the potential debtor has a history that it does not apply to certain accounts, lack of payments or to make late payments, its credit analysis may be unfavorable.

Reason why a loan or loan is needed, you canKé assess. The person may be able to be able to afford payments, but many creditors believe that payments for certain things should not exceed a certain percentage of the person's income. For example, a person can look for a housing loan. It can be able to afford mortgage repayments, but may require 60% of its income. However, a potential creditor may have a rule that he does not issue housing loans when repayment exceeds 20% of the debtor's income.

When one plans to borrow, there are things that can do to become a more favorable candidate for credit. Among other things, the debtor should ensure that all payments for existing debt are made in time and that all accounts are in good condition. If possible, less debts should be repaid to reduce the amount of debt for which the debtor is responsible. Some of these things may take time and lending may need to be delayed, but it is possible to improve one's credibility.