The goal in the Scandinavian countries is to go cashless with citizens banking using online platforms, dealing with finances using credit cards, and obtaining loans with text messages on their mobile devices, otherwise referred to as SMS loans.
That’s particularly true in Norway albeit the guidelines are different from when these loans originated. New regulations are being enforced as borrowers continue to accrue mounds of debt, which they have difficulty breaking free from.
Something that we need to keep in mind is that banks are now expected to assess creditworthiness and financial status before loans are granted, not a consideration with application approval before.
Previously, there was no thought as to whether the applicant could repay the balance allowing access to anyone who applied regardless of the potential risk of default.
What Is an SMS Loan
An SMS loan is an unsecured product meaning it requires no collateral or asset to secure the funds. Please visit billigeforbrukslån.no/sms-lån/ to learn the new guidelines on these loans for Norway. These are low-balance loans taken out for a short term.
Many people compared these to title loans or payday lending before the new guidelines were incorporated since there was very little required to obtain approval and disbursement of the funds. The new regulations are forcing lenders to look at applicants more stringently.
Because borrowers will need to prove creditworthiness and financial status before approval will be granted, the government is hopeful there will be fewer instances of loan default from people obtaining loans who couldn’t afford to pay the installments.
With an excellent credit score and solid financial standing, borrowers have access to a vast range of loan products in Norway, which includes SMS lending. The higher the credit score, the better the rates and terms, and other financial tools will be more readily available with minimal difficulty including credit cards.
How Does Credit Scoring Work in Norway
Lenders in Norway are now mandated to evaluate borrowers for creditworthiness and financial stability in the wake of an onslaught of excessive defaults following SMS lending approvals when there were virtually no stringent eligibility criteria.
Now clients need to prove they can afford to repay the balance before any loan is granted, not just the SMS products. The lender decides creditworthiness based on a borrower’s credit score.
This allows the provider to discern the type of risk you’ll be as a borrower. According to the Norwegian Ministry of Finance, these criteria must be met in order for a client to secure a loan, including SMS lending.
Norway’s Credit scores range from “1 to 100 or 1 to 1000.” Anyone falling from the 1 to 20 range is considered a high risk for a lender, while those ranging from 71 to 100 are the lowest risk and worth investing in a loan. The higher you rank, the greater the chance for low rates and favorable terms.
When a borrower presents in the lowest range, making them the highest risk, they will either receive the highest interest rates or reject the loan altogether.
Four credit reporting bureaus are available in Norway while one bureau will supply each individual’s credit score. The credit score is a compilation of demographics like age/residence, income, taxes, debt, and asset details. Financial history and payment behavior will significantly affect the score.
Tips On How to Improve Credit
Considering a person’s age and income stability are part of what comprises the Norway credit score, trying to determine ways to improve creditworthiness to obtain loan approval quickly is challenging. That doesn’t mean it’s impossible.
You can follow tips to maintain a healthy score or steadily work to reach a good to excellent range to receive loan approval. Depending on your current status it could take time and considerable effort to improve. Here’s steps meant to point you in the right direction.
· A credit score drops drastically when payment remarks are added to the profile
As a borrower, you want your credit history to be free of payment remarks. When creditors include payment remarks it’s due to continued efforts to receive payment on an account with only further delays or missed installments. These remarks will drastically cause a credit score to drop.
The thing with these remarks is no one can claim they are receiving these “unaware.” There are sufficient attempts to collect on the accounts, repeated warnings, and many chances to repay the account before registering the remark with the bureau.
A debt collector will be assigned by the creditor, who will forward a collection notice and offer a final chance for repayment to be made before there is notification of the claim being submitted for legal action.
The positive in this scenario is once the debt is satisfied, the remark is immediately removed, and the score is relieved of the negative impact.
· Enhance personal assets
A credit score will go up if personal assets are enhanced, an indication of financial stability. The credit bureaus in Norway pull details on registered asset details from tax returns filed the previous year. This step can take time to help boost a credit score since it can take time for personal assets to appear on tax records.
· Financial status and income are key components in a credit rating
A low income or one that tends to fluctuate significantly from one year to the next, can adversely affect a credit rating. When you want to improve your credit score, a priority is securing a steady and stable income with an employer with whom you develop a long-term commitment.
· As little debt as possible is important with credit
The objective in most countries, particularly in Norway, is to repay debt as quickly as possible. Credit card debt should be maintained and manageable. In order to do that it means keeping balances low so that these can be paid with each invoice.
That means there’s no need to carry a balance from one month to the next and no interest will accrue, nor will there be associated fees and charges. Terms on consumer loans should be short with monthly installments comfortable and affordable but allowing that the loan be repaid rapidly.
Loan agreements should be read thoroughly to avoid the potential for associated fees or charges attached to the product to avoid prepayment penalties. This charge disallows paying off balances early.
The overall objective in the country is that all debt be repaid quickly and that households maintain as minimal debt as possible. The less debt that shows with a credit history, the lower interest rates will be when applying for credit, like an SMS loan.
· Remaining in one location/proof of residency
A primary requirement when applying for lending in Norway is having a registered residence and proof of that. If you have residency but that residence is not registered, the loan will be denied. If you tend to move frequently, it will adversely impact your credit score.
If you reside in an area known for loan defaults commonly occurring, your credit score will reflect the surrounding social norm instead of being based on your stellar credentials. People will usually decide on their homes based on environmental influences.
· Age is also a component considered when determining credit scoring
Many people would feel that age shouldn’t be a factor in determining a credit score, but the bureaus reason is “based on the overall statistics that come with age.” When an individual is of a particular age there are greater job opportunities and higher income potential.
It’s indicated that reporting agencies will automatically consider younger people and those over the age of 70 with lower credit scores.
In contrast, people in a median age range of roughly 40 will see the highest credit scores because these individuals are considered to be “in their prime for the most promising career and the greatest possibility for a high-income level.”
Why It’s Important to Keep Tabs on Your Credit Score
You will be able to check your credit score with a reporting bureau, including “Bisnode,” if you have a BankID and a national identity number. You’ll need to pay attention to your profile often to ensure no remarks have been registered and to see where your credit score stands in case it needs improvement.
Remarks are readily removed by simply repaying the debt with the score no longer affected by the negative impact.
Many things can contribute to a healthy credit rating. As a rule, in Norway, you want to have as minimal debt as possible, paying balances as quickly as possible and not carrying these to the next month.
Presenting lenders with a steady and stable income from an employer you’ve been with long-term will speak of financial security, as do plenty of valuable assets.
You cannot do much about age, but if all the other facts are stellar, it might not be viewed as a major concern when approving an SMS loan. The government plainly wants to make sure the people taking these loans have the ability to repay them.