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Anyone looking for a financial institution to apply for a loan or a financing knows: waiting for the result of the credit analysis is the time of greatest anxiety and tension throughout this process.
Knowing a little more about how credit analysis works helps to contain some of this anxiety and can even contribute to increase the chances of approval of the proposal.
Each financial institution adopts its own evaluation parameters, but the essence of the process is basically the same in all of them. Let us now know the main steps of a typical credit analysis process.
The cadastral analysis
The first step a financial institution makes is to gather the personal information of the applicant, always on the basis of supporting documents. What the institution expects to find in this step is trustworthiness, that is, knowing that the applicant is really who he or she claims to be, who has a fixed address, a source of income, telephone and e-mail for contact, etc.
The data that the applicant must present and prove include:
- their identification (basically, the data that appear in the RG and in the CPF);
- proof of residence;
- proof of income;
- means of contact (residential, commercial, cellular, email);
- personal and professional references (name and phone number);
- possibly, documents proving their marital status, their dependents, their level of education, property ownership, etc.
In obtaining this data, the institution undertakes to keep them confidential.
The analysis of constraints
This step is well known. The institution verifies that the CPF of the applicant is included in credit restriction registers such as Serasa, SCPC, the institution itself and others.
The result of this search puts the requester in one of the following situations:
- No restrictions: when there is no negative record;
- With alerts: when there are old records already closed; In this case, credit approval is not normally denied immediately, but the institution adopts a greater rigor in the other analyzes;
- With restrictions: when the applicant has pending credit with other institutions, such as delays, renegotiations, defaults, protests, inclusion in the registry of issuers of checks without background, search and seizure actions and others;
- With impediments: when the applicant is prevented from taking credit due to blocking of assets, impediments of the Housing Finance System or other legal determinations.
The analysis of the credit profile (score)
Together, the cadastral data and the survey of replies provide several indicators, each with its degree of importance, to the definition of the credit profile of the applicant.
Each indicator receives an evaluation. In the end, the composition of all of them leads to a score given to the applicant, which reflects the institution’s view of the likelihood of the commitment being withdrawn.
Some indicators are evaluated according to the categories in which the applicant fits.
For example, imagine that the applicant belongs to a certain age group. If creditors of the same age group have a good track record in relation to the discharge of the loans contracted, the applicant will receive a note compatible with this good reputation. Of course if the reputation is not good he will receive a corresponding note.
The age range is just one example, several other items can be considered, such as the income range, the region in which you reside, your marital status, the professional category to which you belong, and so on.
Other indicators relate to the applicant’s financial life. They are given as:
- the number of times the applicant sought credit in the market;
- how many of these searches were in banks and how many were in financials;
- value of outstanding debts;
- existence of credit restrictions or lawsuits against the applicant;
The analysis of income impairment
In this stage, the applicant’s ability to pay is analyzed. Proof of income is the main source of information. The concern of the institution is to ensure that the installments for the discharge of the loan will fit within the budget of the applicant. In general, it is considered reasonable that the amount of the monthly installment for the discharge of the debt does not exceed 20 or 30 percent of the income, but this may vary from one institution to another.
The institution will take extra care with applicants who have no fixed income in the month. In these cases, it can analyze longer periods and more detailed data, arriving at a kind of balance sheet of the applicant.
The equity analysis
In certain credit modalities, assets may be offered as collateral, which may result in reduced risks to the institution and lower interest rates for the applicant. But the institution needs to first evaluate these assets to make sure they are in good standing and also to determine what their real value is in the negotiation.
Concluding: credit is synonymous with credibility
In addition to all these analyzes, the economic situation may influence the decision regarding the granting of credit or not. More favorable scenarios, with the heated economy, tend to facilitate credit taking. The opposite occurs for moments of market stagnation or retraction.
Another important point is that, as stated earlier, although the analysis steps presented above are common to all financial institutions, each one adopts its own evaluation parameters. Thus, for example, what for one institution may represent a decision to deny credit to the applicant, for another it may mean approval with a higher rate.
On the applicant’s side, knowing a little more about the principles that guide the credit analysis can and should lead you to surround yourself with some care such as avoiding the negative of your CPF, keeping up-to-date and clear vouchers, maintaining a good relationship with financial institutions, control their finances and demonstrate a good ability to pay, for example.
It is easy to remember that credit is synonymous with credibility. The credit analysis is essentially an analysis of the credibility that the applicant passes to the institution in terms of financial behavior.
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