Consumer debt in Europe is at an all-time high thanks to efforts from lending giants, which puts households in countries such as The Netherlands, Cyprus, and Denmark at a debt ratio of over 200%. These figures only represent consumer credit, which may be a boost to the economies but may also place a strain on disposable income. To qualify for a mortgage loan, there are a few hoops consumers need to jump through. But sometimes, these hoops are not clear or may not make sense. This guide should help consumers make more sense of the reasons for the decline.
Paying Accounts in Advance
This may come as a surprise to many consumers as this should be an indication that account holders are in control of their finances. The unfortunate truth is that consumers who tend to overpay on their installments are more likely to skip a payment once in a while as they are already in advance. This can cause issues on the credit bureaus as the system will automatically pick it up as a missed payment.
To Remedy This:Always pay at least the minimum installment every month even if the account is paid in advance.
Bad Credit Scores
Whether it was the state of the economy or just a few financial hiccups, many find themselves in a difficult financial position at some point in their lives. What many don’t realise is that there are some items that also negatively affect credit scores. Even when consumers make arrangements with their lenders, the late or missed payments may still reflect poorly on the credit bureaus. Even without missed payments, those financial difficulties can still make it difficult to apply for a mortgage thanks to maxed out credit. Yet, this is not the end of the road for consumers, as can be seen by this Norwegian example of lending.
To Remedy This:Seek out alternative sources of finance and try to consolidate many smaller loans into a single option. Also lower balances as far as possible.
No Credit At All
Once again the reluctance to take out finance might not work in the favour of the applicant. This is because banks prefer to lend to those who have a proven repayment history as it reduces their risk. Without a debt track record, there is very little for banks to go on and the willingness to repay the loan cannot be established. This is because the consumer is not used to repayments and getting into a 20 or 30-year commitment may be difficult to manage.
To Remedy This:Take out a small credit facility such as a personal loan, credit card, or overdraft facility to build up a credit history. Those who have a proven track record in terms of their rental payments may use this to motivate their application as well.
Repairing a credit score can take a few months and in extreme cases, even a few years. Consumers are encouraged to start work on their credit scores immediately and consistently to ensure they’re always in the green. They also have the advantage of a free credit report once or twice a year which gives them an indication of their personal credit wealth.