Assessing the creditworthiness of the borrower is one of the most important aspects of the lending process. This is a completely justified action on the part of financial institutions, since the correct assessment of the borrower's ability to repay the loan and the interest on it directly affects the following parameters of the bank - risk, the quality of the loan portfolio, the potential level of debt repayment, the occurrence of late payments, and, as a result, the final profit credit organization.
It is not surprising that each bank pays special attention to such a parameter as methods for assessing the creditworthiness of a borrower.
As a rule, a single, universal methodology for all financial institutions does not exist. In each bank, loan officers develop an individual assessment of the borrower's creditworthiness. However, common points are still present in the methods of banks, although they are compiled by completely different people.
Naturally, the initial level of assessment begins with the definition of the borrower as an individual or legal entity. Analysis of the creditworthiness of the borrower as a legal entity is a very time-consuming process, it is based on a variety of models and methods for assessing financial condition and solvency. First of all, the initial financial statements of the company are considered, in particular, the structure and dynamics of financial flows, liabilities and assets of the organization, as well as ratios characterizing the financial condition of the company.
If a legal entity can submit a huge number of documents on the basis of which it is possible to conduct a financial analysis, then the credit rating of a borrower as an individual is carried out according to a completely different scheme.
The initial information on the solvency of a private borrower includes the following parameters - dynamics of income, current level of expenses, availability of credit, administrative and other obligations.
It is worth noting that the attitude towards private individuals is more loyal, as many credit organizations take into account not only documented incomes, but also subjective facts that the client cannot confirm. By the method of simple arithmetic operations - income minus expenses and liabilities - loan specialists determine the ability of a client to repay a loan. Naturally, with an insufficient level of the borrower's net income, the application will not be approved. If the size of the monthly loan payment will be more than 50% of the income, most often the answer will also be negative.
Assessment of the borrower's creditworthiness also depends on the type of lending. For example, a scoring technique based on the analysis of the minimum amount of information about the borrower has been widely used recently. In particular, it considers such parameters as the age of the client, his labor and social status and, of course, income. As a rule, the decision on such loans is made in the shortest possible time, some banks offer registration in just an hour.