One Mistake Does Not Mean Lifelong Credit Unworthiness
In fact, not all payment defaults occur due to carefree spending. Very often, the reason is significant and unexpected life changes – temporary job loss, health issues, family events, or other situations that put a person under financial pressure for a period of time. Sometimes a single unexpected expense or the coincidence of several smaller matters can be enough for a bill to go unpaid on time. Such situations can affect anyone and usually do not reflect a person's persistent spending pattern or attitude toward their obligations. It is important to distinguish temporary difficulties from situations where payment problems recur over a longer period. For a bank, this distinction is very important, writes Marina Larkova, head of the home loan sales unit at Bigbank Estonia.
Practically every person living in Estonia has a dream of owning their own home. This idea can emerge early or develop over time – everyone has their own path and pace. Youth is often a time of experimentation when decisions are made that may seem thoughtless or too hasty in hindsight, and sometimes the consequences of these choices only become apparent years later, when someone begins to seriously think about buying a home for the first time.
In fact, not all payment defaults occur due to carefree spending. Very often, the reason is significant and unexpected life changes – temporary job loss, health issues, family events, or other situations that put a person under financial pressure for a period of time. Sometimes a single unexpected expense or the coincidence of several smaller matters can be enough for a bill to go unpaid on time. Such situations can affect anyone and usually do not reflect a person's persistent spending pattern or attitude toward their obligations.
It is important to distinguish temporary difficulties from situations where payment problems recur over a longer period. Of course, every bank's risk appetite and loan application assessment methodology is different, but for Bigbank this difference is very important. If a person has gone through a difficult period but has subsequently restored their financial situation and fulfilled their obligations correctly, this indicates rather responsible behavior and the ability to restore balance to their life. However, if payment problems recur and obligations accumulate, it may mean that there are deeper and more persistent problems that require separate assessment. It is precisely these nuances that we seek out and evaluate at Bigbank – not just numbers, but the logic of the reasons and the history as a whole.
You let 45 days pass and suddenly you have a debtor stamp attached for years?
In today's digital economy, a payment default can occur faster than expected. If an invoice has been unpaid for at least 45 days, the debt is entered into the register. For many, this comes as a surprise – especially if it was an accidentally forgotten bill or some temporary period when a person was dealing with important personal or health concerns or was, for example, away on a long trip. However, a registry entry actually affects a person's ability to obtain a loan, because most banks cannot ignore this mark, and therefore a home loan application often fails because of it. At Bigbank, on the other hand, we take the time to understand the background of the situation – what exactly happened, how the person resolved the situation, and whether their financial behavior has stabilized in the meantime.
A previous mistake should not be a permanent label attached to a person. Financial behavior changes over the course of life, and it is not fair to regard a person today as being in the same situation as they were in a more difficult period a few years ago. For Bigbank, what matters much more is a person's current situation. Have previous debts been paid? Has payment behavior been correct for some time already? Are income and obligations in balance? If a person has gotten their financial situation in order and demonstrated responsibility, we see no reason why a home loan should not be considered.
Buying a home is one of the most important steps in a person's life, and determining this opportunity based solely on one past mistake is neither fair nor justified. We believe that a person should be assessed on the basis of the complete picture, not a single incident. And if previous difficulties have been overcome, obligations paid, and financial stability restored, a home loan is again entirely realistic – even if a few years ago it seemed still out of reach.
