Credit Rating and Mortgages: Your Financial Identity Card

In the new credit data era, your financial history determines not only whether you'll get a mortgage, but how much you'll pay for it. Everything you need to know about the BDI, credit reporting, and how to approach the bank prepared.

Mortgage Eligibility Check

What is a Credit Rating and Why is it Critical for Mortgages?

Many of our clients who come to us for mortgage consulting focus primarily on the equity they've accumulated and their monthly repayment capacity. These are indeed important parameters, but in recent years a new and significant player has entered the field: the Bank of Israel's credit data repository.

The credit database collects financial information on every citizen in the country. This information is weighted into a score (rating) often referred to by the generic name 'BDI'. This score reflects to the bank your risk level as borrowers. The higher the rating, the more the bank sees you as 'safer' customers, and vice versa.

When you approach to take a mortgage for a first apartment or refinance an existing mortgage, the bank checks this rating even before looking at your pay stubs. A low rating can lead to significantly higher interest rates ('risk premium') and even complete refusal to grant the mortgage.

What affects your credit rating?

Payment behavior

The most influential factor. Delays in loan payments, returned standing orders or bounced checks (even isolated ones) paint the report red and damage the rating immediately and significantly.

Credit facility utilization

Full utilization or exceeding the credit facility at the bank or credit cards signals cash flow distress. It's recommended to maintain utilization of up to 50% of the approved facility.

Historical tenure

The longer and more proper credit history you have, the better the rating improves. Closing old bank accounts or credit cards can sometimes actually harm the rating in the short term.

How much does it cost you in money?

The difference between a customer with a 'green' (excellent) credit rating and a customer with a 'yellow' or borderline rating can be expressed in an interest rate gap of 0.5% to 1.5% or even more. In an average mortgage of one million shekels for 25 years, this gap translates to additional payments of tens to hundreds of thousands of shekels over the life of the mortgage.

How to improve the rating before the mortgage?

• Order a data summary report: You have the right to receive a free report once a year from the Bank of Israel website. Check that there are no errors in the reports.
• Close small loans: Multiple loans indicate stressed financial management. Loan consolidation can help improve the profile.
• Avoid unusual activities: In the months before submitting the application, avoid dramatic changes in the account or taking new consumer credit.

The importance of mortgage consulting in complex cases

If you discovered you have a 'stain' in your credit history, it's not necessarily the end of the world. This is exactly where the value of professional mortgage consulting comes into play. An experienced consultant knows how to present the data to the bank correctly, explain one-time incidents that occurred in the past, and build a mortgage mix that minimizes risk in the bank's eyes.

In-depth analysis

Thorough examination of the credit data report before approaching banks to prevent unnecessary rejections that are recorded in the system.

Negotiation

Managing tough negotiations with banks to reduce interest rates even when opening data is not perfect.

Creative solutions

In cases of bank refusal, finding alternative financing solutions or building a financial recovery plan.

Want to know how your rating affects your mortgage?

Don't approach the bank without prior preparation. Ariel Achon's team of experts is here to check the data, improve your starting point and secure the best mortgage for you.

Schedule a consultation meeting