The following factors are considered when applying for finance:
Factors include:
Repayment – The ability of the customer to consistently repay the required instalments over the term of the contract.
Income– The nature of the customer’s income sources is an important consideration. This is in order to determine how reliable the customer’s income or cash flow is for the duration of the contract.
Potential behaviour – The potential payment behaviour of the customer based on known or recorded history is a factor. This is where the previous conduct of the customer’s bank accounts is very useful. Credit references from previously held credit facilities provide a better indication of the repayment behaviour of customers.
No previous credit facilities – If a customer has had no previous credit facilities to provide the required behavioural history, financial institutions may still consider other information that is useful to determine the potential conduct of the customer.
These include:
– The historical behaviour of the customer’s transactional accounts reflected in his or her monthly account statements;
– The payment history on non-credit facility accounts like a Telkom account, cellphone accounts, electricity and water accounts.
Credit bureaus are able to provide ratings to financial institutions based on these types of accounts.