Written by Nipapun Poonsateansup, CFP®, Financial Advisor
Sooner or later in life, most of us want to borrow some money, whether it's a mortgage, credit card account or smalll business loan. But the bank needs to know you'll pay back what you borrow and do it on time. That's when it's important to be able to prove your financial reliability, also known as creditworthiness. If you have this quality of financial credibility, your application to obtain or expand a credit line is more likely to be approved.
How can you prove that you are a good credit risk? Here are a few tips.
- The first criterion a bank will consider is whether you have a stable job and strong salary base. The more stable your employment, the higher your salary, the more senior your position, the more you will be rated as creditworthy. A full-time employee is likely to be seen as a better credit risk than a freelancer. If you are now an employee but plan to become a freelancer, you should get a credit card and any needed loan before you resign.
- The financial institution will inspect your financial records as part of the process for evaluating a loan application. It wants to make sure you have a solid track record of paying back debts on time.