Before granting a loan, banks look at the various sources of information that indicate the borrower's solvency, past and present liabilities - how the various payments are made, how much income is spent and how it is spent, and what the credit rating is - so that the bank can assess the probability that the borrower will be able to repay the loan in full and on time. It is formed from various types of information available in the credit history - credit card liabilities, electricity, house management, fuel or other services postpaid bills, is regularly updated and is constantly changing. This figure is important because it allows the lender to predict the borrower's behavior and determine the probability that the repayment will be made on time and in full.
What is a Loan With a Damaged Credit History?
The need for extra money can arise for anyone, including those with outstanding loans or a negative credit history. Credit to debtors is always credit with a bad credit history, because delaying the loan, defaulting, or ignoring the loan, even for objective and complex reasons, makes the borrower a debtor.
If previously issued loans have not been repaid in full, banks may issue additional collateral in the form of an increased interest rate, collateral, or guarantor (to make sure that the loan will be settled) or, more often, decide to refuse the loan.
Although all applications are considered on an individual basis and the bank decides whether to grant or refuse a loan for reasons of deteriorating credit history, most lenders do not grant loans to individuals at risk of getting on debtors' lists. They are definitely not granted by the largest banks (Swedbank, Luminor, Citadele, SEB, PrivatBank), as well as by most non-bank lenders.
Consequently, a loan with a damaged credit history is most often a short-term loan for a small amount of credit with a high interest rate.
Bad Credit History is Kept in Debt Registers for 10 Years!
Although loans to debtors are in demand, lenders continue to emphasize that re-borrowing is not recommended until other debts have been settled - which have also led to a damaged credit history. Also, it should never be another debt repayment - because it does not solve problems, only creates new ones.
Although credit history lasts for 10 years, most banks are not interested in history older than two years - if all debts have been settled in recent years and your name does not appear in debtors' registers - there is no reason to worry - you can also apply for a loan on good terms.
It must also be taken into account that the outstanding loans do not disappear anywhere, contrary to the public opinion that it is possible to escape from them. If there are old loans or other post-paid bills that have not been repaid and this obligation has been ignored, it is likely that the debt has multiplied and it may be difficult to make other loans or contracts in the future.
