Credit History and Mortgage Loan Approval

What is credit history?

Credit history reflects an individual’s behavior in servicing loan and credit obligations. It includes information regarding:

Existing and previous loans
Credit cards and financing limits
Payment delays
Debt restructuring arrangements
Contract terminations
Overall consistency in meeting financial obligations

Banks use credit history as a key indicator of creditworthiness when assessing a mortgage loan application.

When assessing a mortgage loan application, the bank examines:

The existence of active loan obligations
The history of payment delays (days past due)
Any recent debt restructuring or refinancing arrangements
The consistency of repayment over recent years
The applicant’s overall credit profile

The mere existence of outstanding debt does not automatically result in rejection. The assessment primarily focuses on consistency and long-term repayment behavior.

Which indicators are considered adverse?

The following situations may negatively affect approval:

Repeated payment delays exceeding 30 or 60 days
Recent past-due obligations
Termination of a loan agreement
Unsettled debt restructuring arrangements
High concentration of active credit lines

In such cases, the application may:

Be rejected
Be approved under stricter terms
Be approved for a lower amount

Can a mortgage be approved with an impaired credit history?

Approval is not automatically excluded in every case of a negative indication. The final decision is determined in combination with:

The amount requested
The loan-to-value ratio (LTV)
The debt-to-income ratio (DTI)
Income stability
The time elapsed since previous payment delays

The overall profile is assessed in relation to the level of risk assumed by the lending institution.

How can the credit profile be improved before submitting an application?

Before submitting a mortgage loan application, it is recommended to:

Settle any past-due obligations
Reduce active credit limits
Maintain consistent and timely repayment of installments
Avoid obtaining new financing shortly before the application

Improving the credit profile enhances the likelihood of approval and may positively influence the final financing terms.

Conclusion

Credit history is a decisive factor in the assessment of a mortgage loan application. Consistency in servicing financial obligations serves as an indicator of credit reliability and influences both the likelihood of approval and the financing terms.

Understanding the credit profile prior to submitting an application allows for realistic planning and more effective preparation of the loan file.