Purchasing and Financing 2024

6. CREDITWORTHINESS
Students understand the importance of a good credit rating.
Before a loan is approved the creditworthiness of the applicant will be judged. A customer
desiring a loan from his bank makes a loan application after a preliminary verbal
discussion. Many financial institutions use a printed application form with a list of
questions for this purpose. The bank checks the information supplied by the applicant and
builds up an overall picture of his personal creditworthiness and his ability to repay the
loan.
Personal creditworthiness is awarded when the borrower is a reliable person of good
character, hardworking and diligent in his job. The ability to pay the loan is set by the
prescribed financial background, from which a level of credit is assessed.
The following methods are used to evaluate creditworthiness:
Obtaining Information
Information about the customer is obtained mainly from credit rating offices (credit
bureaus). They rely on information and data from their own sources (agents) as well as on
information provided by suppliers. In granting loans to private individuals, the bank
generally also makes use of a credit rating office.
The bank can go further, with due discretion and circumspection, in making use of
references from business acquaintances of the loan applicant. Information is further
provided by trade organizations and associations and is also exchanged between banks.
Examination of public registers
Important conclusions concerning the financial situation and the legal relationships of the
customer can be found in, for example, the land register, the company register and the
property register. In many cases attested certificates and statements will be required of
the customer. For acceptance loans, the (non-public) list of bills protested is essential.
Examination of the bank account
In most cases the borrower has been a customer (by maintaining a bank account with that
bank). The turnover in his account allows conclusions to be drawn concerning the type
and scope of his transactions and his payment history.
Visiting the company
If the borrower runs a business, this provides an overall impression of the state of the
business and of his organization. The important points for a bank are the value of the
stock and machinery.
35