It is widely known that banks and MFIs always analyze the borrower’s profile before giving a positive answer. It takes up to 3 working days to make a decision in banks. This is the reason why so many people work with MFIs that approve or reject a request in 10-15 minutes. Despite the urgency of such an analysis, it is quite thorough. The speed of response is ensured by the fact that the scoring program analyzes the client in a few minutes. So, how to increase your chances of approval?
Credit Scoring Analysis VS Credit History Check
There are three main methods for assessing the creditworthiness of an individual:
- scoring analysis;
- credit history check;
- assessment of financial solvency.
In the US, the basis for assessing the creditworthiness of an individual is the credit history check. The MFI uses the information contained in the application for a loan: name, address of residence, and social security card number. When people ask for online loans at cashspotusa, they indicate the size of monthly income themselves without confirming their solvency by any certificates. The MFI makes a request to check the credit history and current debts of the applicant and then issues a loan.
The financial analysis of the borrower is made on the basis of the income–to-expenses ratio taking into account the loan amount. The better the solvency of the client is, the higher the likelihood of approval.
Meanwhile, many MFIs prefer making the analysis of scoring. It is based on the system of criteria and indicators of the borrower’s ability to return the main debt and interest. These indicators are evaluated in points defining individual credit rating. There are various models of scoring assessment, so let’s talk about them in detail.
Customer Credit Evaluation Criteria
Every single MFI has its own criteria for assessing credit risk and customer solvency. The wide-known world practice requires the assessment of the following points:
- The character of the client;
- Ability to borrow funds;
- Ability to pay off debt;
- Loan security;
- Conditions under which a credit operation is performed.
The character of the client refers to his/her reputation, responsibility to pay off debt, understanding of the purpose of the loan, and the compliance with the credit policy of a certain financial institution.
The ability to borrow funds means that the client has the right to apply for a loan and sign a loan agreement. The conditions in which a credit operation is performed determine the degree of external risk of the MFI.
Analysis of the Borrower`s Profile
The scoring program carefully analyzes the answers to the questions. For each position on the questionnaire, the program sets a certain number of points. Each company has its own unique analysis technique and scoring settings. For instance:
- According to statistics, women repay loans better than men, therefore, they will get more points for the “gender” column;
- Statistics also say that public servants better return loans, so for the type of activity they will get more points;
- Leaders get more points as well because they have higher positions in the office and more responsibilities;
- Young borrowers do not return loans well, therefore, clients receive the lowest score for their young age (18-20 years old). The same thing happens with retirees, as their age is risky.
As you see, each position in the loan application is carefully evaluated. The client receives a certain number of points for their credit history and the level of solvency. If the client has reached the minimum level of credit rating established by a particular MFI, the system approves the request.
Big Brother Is Watching You
When issuing an online loan, the analysis includes not only the information provided in the questionnaire but also his actions on the site as well. The program analyzes how the person behaves while filling the form. So, when you are on the MFI’s website, they are already watching you. So, don’t give them a single chance to be suspicious. Here are some examples of that:
- You start to immediately fill in a loan request as soon as you open the site. It is recommended that you first study the terms, read the requirements for borrowers, and after that, make a request.
- It will be suspicious if you start copying your passport data and full name from some other source. So, fill in the questionnaire manually.
- The suspicion will also arise if you change the primary data, erase it and indicate another info.
Considering the above mentioned, we advise you to act naturally.
Do MFIs Analyze Social Networks?
Many microfinance organizations configure their scoring programs to analyze the applicant’s profiles on social networks, as well as their activity on the Internet. If you need to make links to your profiles on social networks in the loan application, then MFI will analyze them.
Here are the facts that can cause suspicion or negative reaction:
- Different data in the profile and in the loan application;
- The membership in “bad” groups;
- Provocative posts and publications;
- The date of account creation.
So, putting your profiles in order is a must-do to avoid questions and doubts.
In Conclusion
The customer solvency check is one of the most important methods of reducing risks and the successful implementation of MFI’s credit policy. It allows for avoiding unreasonable actions when issuing a loan. The creditworthiness of customers gives confidence in the effective use of borrowed funds and the willingness of the borrower to repay the loan in accordance with the terms of the contract.
The most important thing for any lender is the solvency of the client. His financial condition should correspond to his debt obligations, so he will repay a received loan without any problems. If you think that this is about you – leave your doubts and apply for a loan. Learn the detailed conditions on the website of a particular organization and enjoy your cooperation. Finally, it may be the only chance to improve your financial state.
