In the previous article, we talked about personal loans, and how you as a customer can apply and receive one. In this installment, we will explain how the bank makes its decision about giving you a loan and the factors involved in this decision:

How does a bank get financial information about their customers?
In Egypt, banks are given access to a system created by the Egyptian Credit Bureau (i-score) that contains information about customers’ credit such as loan payment history and the status of credit liabilities and supplies it to the requesting bank.
The Egyptian Credit Bureau compiles this information from two sources:

  1. Data reported from banks and other lending members containing customers' facilities updates with balances and payments delays.

  2. Data reported from banks periodically to the Central Bank of Egypt (CBE) with updates to the credit registry, the negative list, and legal actions.

This information gets translated into a credit score, a three digits number that tells the bank how reliable you as a customer will be, by adding up five factors:

  1. Payment history: How often you were late in paying your dues to banks and lending institutions.

  2. Outstanding debt: Percentage of credit card balances available for use to you.

  3. Credit history length: which takes into account:

    • How old are your credit accounts

    • How old are specific credit accounts

    • How long since you’ve used certain accounts

  4. Pursuit of new credit: it takes into account the number of new inquiries and the number of new facilities you received in the past year.

  5. Credit Mix: Shows the different facilities you have taken out, such as credit cards and different loans and their percentages.

*For more information on these factors and their respective importance in your credit report and score, please refer to The Egyptian Credit Bureau
To ensure your application gets approved, your credit score must be satisfactory to the bank. Here’s how you can improve your credit score:

  1. Pay your dues on time: Paying your outstanding balance on time constitutes most of your credit score. One or two late payments won’t cause your score to go down significantly, but don’t make a habit out of it or you won’t be approved for further facilities.

  2. Apply for the facilities that you need to allow your score more leeway when another need pops up.

  3. Keep your old credit cards: Even if they’re inactive, keeping them will preserve vital info about your credit history from the report.

This was a quick rundown of what personal loans are, how to successfully apply for one, how banks assess their customers, and how you can improve your standing.
Good luck in all your financial transactions!

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