Knowing how credit applications are assessed is the best way to get the loan you want

Access to the right credit, for the right reasons, can be a valuable tool for financial growth and stability, providing you with the means to take advantage of opportunities that can enhance your life. However, there’s a lot more to a credit facility or loan, at a good interest rate, than just filling out an application form.

According to Ester Ochse, Product Head at FNB Integrated Advice, having a good understanding of how banks and other credit providers evaluate potential borrowers allows you to maximise the chances that your application will meet with a favourable response. She offers insights into the criteria applied by FNB, and most other lenders, to decide whether to approve your credit application and what interest rate to offer you:

Credit score and history - Your credit score is a pivotal factor in the loan approval process. It’s a summary of your history with credit and an indicator of whether or not you are likely to repay your loan. “Your credit score is calculated from your credit history, which includes previous loans, payment records, and overall financial behaviour,” Ochse explains, “and the higher your credit score, the better your chances of being approved for credit at a favourable interest rate.” You can check your credit status on the FNB App under nav»Money.

Ochse further highlights that, “FNB’s recent credit activity analysis reveals that most unsecured credit scorecards of customers who have taken out a lot of credit in the last 6 months could be a sign of financial distress or change in circumstances. Moreover, on average, these customers tend to pay worse on the credit they’ve been given.”

Affordability – Credit providers are bound by the National Credit Act to lend money responsibly. A big part of that is making sure that you are not getting yourself into a situation where you can’t afford to make the repayments on your debts every month. So, if you only have R1 000 left in the bank after you’ve paid your monthly bills, a bank is not going to approve a loan with monthly repayments of R3 000. That’s how affordability assessments protect you, and the credit provider.

Income and employment stability - Banks also carefully scrutinise your employment status and the stability of your income. This allows them to assess your ability to make the monthly repayments on the loan if they give it to you. “If you can show that you have a stable job and/or that you have earned a steady income for a reasonable length of time, a credit provider will feel more at ease about the risk they will be taking on by lending you the money you want,” Ochse says.

Debt-to-income ratio - This is a comparison of how much money you earn, and how much of that money is already going towards paying back existing debts. A lower ratio suggests a better balance between your income and debt obligations, and that makes you a more attractive prospect for credit providers, because it means you have a higher amount of disposable income available to pay back the credit you have requested from them.

Banking history – If you’re applying to a bank for a loan or another form of credit, your past relationship with your main bank can influence the outcome of your application. “The bank will want to see that you have a solid history of responsible financial behaviours,” Ochse says, “such as making regular, on-time payments, not being overdrawn on your account often, and always having money in the account to cover your debit orders.”

Ochse says that, by having all these factors in place, the chances of being approved for a loan are likely to be much higher. However, she points out that there are no guarantees that you will get the loan you want, and she emphasises the importance of seeing the positive side of a declined application.


“While it’s never a good feeling to have a credit application declined,” she says, “it’s useful to take the experience as an opportunity to reflect on your finances and also take the necessary steps to improve your creditworthiness.” She recommends asking the credit provider to explain why they refused your credit application, and then taking targeted steps to address those areas, positioning yourself for success in future applications.


“Remember that credit providers are not adversaries, and they’re not out to find reasons to turn you down,” Ochse concludes, “they just need to have the assurance that borrowers can and will repay their loans. So, understanding exactly what positions you as such a trustworthy borrower in the eyes of credit providers, and then doing everything you can to meet those credit assessment criteria, is the best way of ensuring the success of your credit applications.”