Creditworthiness and a good credit history – how to build them?
Not everyone can buy a flat or build a house out of savings. So for most people, building creditworthiness and a positive credit history is the key to making many financial dreams come true – from buying your own home, through investments, all the way to growing a business. Although the terms “creditworthiness” and “credit history” may sound complicated and easy to confuse, in practice they come down to a single question: “Can the bank trust me?”.
Before we move on to how to obtain creditworthiness, you need to understand these two concepts well. Creditworthiness is, to put it simply, our financial credibility – that is, an assessment of whether we will be able to repay the obligations we take on. Credit history, on the other hand, is a record of how we have handled loans, credit cards or instalment purchases so far. These two elements are closely linked and determine whether a bank or another financial institution will support us.
In this article you will learn what creditworthiness is, how to build creditworthiness, and what factors affect your BIK score (the score kept by BIK, Poland’s credit information bureau). You will also get practical tips that will help you take care of your financial credibility and open the door to better borrowing opportunities. Whether you are planning to take out your first loan or to improve your financial situation, this guide is for you.
Co tu znajdziesz?
- 1 What is creditworthiness?
- 2 Planning to take out a mortgage?
- 3 How can I check my creditworthiness for free?
- 4 What is credit history?
- 5 How does BIK calculate the score?
- 6 Or maybe you know someone thinking about a mortgage?
- 7 How to build creditworthiness?
- 8 How to take care of a good BIK record?
- 9 Summary
- 10 In brief
- 11 Key concepts
What is creditworthiness?
Creditworthiness is one of the most important concepts in personal finance. It determines whether a bank or another financial institution will grant you a loan and, if so, on what terms. In short, it is an assessment of your ability to repay an obligation within a set period, according to an agreed repayment schedule.
To know how to build creditworthiness, you need to understand what it is. Banks calculate creditworthiness based on a detailed analysis of several key factors. The most important of these are the amount and stability of your income, your type of employment, your fixed expenses and other financial obligations (loans, credit cards, etc.). In addition, factors such as your age, the number of dependants and your credit history are taken into account. The latter shows how you have handled debt repayment so far.
The creditworthiness assessment often affects not only whether a loan is granted, but also the interest rate and other terms of the agreement. By understanding clearly how this mechanism works, you will deliberately improve your financial situation and increase your chances of securing favourable loan offers. Or you will simply plan how to obtain the creditworthiness you need to carry out your plans.
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How can I quickly check whether I’ll get a loan?
Creditworthiness, although it may sound like a complicated term, essentially comes down to one basic question: whether we are able to repay our monthly loan instalments. Banks analyse our finances to determine the maximum amount of debt we can take on our shoulders. In a simplified way, you can estimate this yourself by performing a few simple steps. All you need is to understand what creditworthiness depends on.
To start with, you should add up your monthly income – but be careful, only the income that the bank will accept. Later in this article you will learn how long you need to have an employment contract in order to get a loan. You will also see what other types of income are accepted by banks. Apart from an employment contract, these are most often income from business activity, a contract of mandate or property rental, provided, of course, that they have lasted long enough and are documented.
Next, we subtract fixed living costs, such as rent, bills, spending on food, transport or other obligations, e.g. instalments on current loans.
The difference between income and living costs is, roughly speaking, the maximum amount we can put towards a loan instalment. For example, if you earn 5,000 PLN a month and your fixed expenses are 3,000 PLN, then in theory you can afford an instalment of around 2,000 PLN. It is worth remembering, however, that banks apply various safety buffers and a sensitivity analysis. They have to be sure that the loan will not overburden our budget even if the economic situation in Poland were to deteriorate.
How can I check my creditworthiness for free?
How do I check whether I’ll get a loan? Just a few years ago, estimating creditworthiness was relatively simple. Banks created creditworthiness calculators in spreadsheets (Excel files), which they also shared with their partners (credit experts and loan comparison sites). On this basis, professional comparison tools (i.e. those intended for credit experts) such as Finhouse and Finpack were able to calculate creditworthiness.
Finhouse also made its comparison tool available for free, so anyone could use it and calculate their own creditworthiness independently. Unfortunately, those days are over. Currently all calculations take place within the banks’ closed internal systems, which only accredited intermediaries and the institutions’ employees can access, so comparison sites no longer calculate creditworthiness.
For you, this means one thing: checking your creditworthiness on your own is practically impossible. Even if you find some kind of creditworthiness calculator online, it is not based on the banks’ actual databases and will not take into account their detailed guidelines and procedures.
That is why, when you are wondering how to check your creditworthiness for free, the best solution is to contact a credit expert who is accredited with many banks and has access to professional tools. As an experienced credit expert, I can not only assess your creditworthiness precisely and explain what creditworthiness depends on, but also point you to the banks that will offer you the best lending terms. This way you will save time and avoid unnecessary loan enquiries, which could lower your BIK score.
If you are planning to apply for a loan, get in touch with me. Together we will find a solution tailored to your needs and possibilities. You don’t have to worry about the formalities – I will take care of everything for you, and it won’t cost you a thing.
What is credit history?
Once you know what creditworthiness is, we can move on to the second element responsible for how to get a mortgage for a home. Credit history is a record of all our financial obligations and their repayment, which is held at BIK, Poland’s credit information bureau (BIK). It contains information about loans, borrowings, credit cards or instalment purchases you have taken out. Thanks to this, banks can assess how reliable a customer you are and whether you keep to your financial commitments.
In your credit history you will find data on the timeliness of repayments, your current debt, and any delays in paying instalments. Regular, on-time repayments help build a positive image in the eyes of financial institutions, which may result in better loan terms in the future. Delays or missed repayments, on the other hand, can have a negative impact on your scoring assessment and thereby limit your access to financing.
Everyone has the right to check their credit history at BIK. You can do this by purchasing a BIK report or by using the free option, the so-called statutory information, which you can download once every six months. Consciously monitoring your credit history is an important step in managing your finances and looking after your credibility in the eyes of banks. Knowing what creditworthiness and credit history are, and the differences between them, you can manage your finances in such a way that the world of banking stands open before you.
How does BIK calculate the score?
The score at BIK (Poland’s credit information bureau) is a rating that allows banks and other financial institutions to assess a customer’s credit credibility. In Poland it is one of the most important indicators when making lending decisions. The score is expressed on a points scale (from 1 to 100) and is based on an analysis of various aspects of a person’s credit history and financial activity.
BIK uses advanced algorithms that take into account both positive and negative data. The basic factors that affect the score are: timeliness of repayments, the number and variety of obligations, credit history, and the number of loan enquiries submitted recently. A key element is consistency in repaying instalments – even small delays can significantly lower the score.
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In addition, the score takes into account the length of credit relationships. A longer credit history at BIK, dominated by positive entries, works in the customer’s favour. It also matters how many obligations you are repaying at the same time – a larger number of loans may suggest a risk of over-indebtedness.
Although BIK does not disclose the full formula for calculating the score, its mechanism is transparent when it comes to the key guidelines. Thanks to this, customers have the opportunity to improve their assessment. They can do so by taking care to repay on time or by sensibly choosing the banks to which they submit loan applications.
Timeliness, activity and the number of enquiries
The BIK score is based on three main pillars: timeliness, activity and the number of loan enquiries. Each of these factors has a significant impact on the points assessment and determines how financial institutions perceive our credibility. A good points score at BIK is a key factor in determining how to get a loan on favourable terms.
1. Timeliness
This is the most important aspect assessed by BIK. Regular, on-time repayment of obligations builds a positive image in the eyes of banks. Even minor delays, especially those exceeding 30 days, can significantly lower the score and have a negative impact on future lending decisions. If I know I have no delays in repaying my loans, I don’t have to worry about whether I’ll get a loan.
2. Financial activity
BIK analyses how often we use various credit products, such as loans, credit cards or instalment purchases. Variety and active use of credit products can raise the score, provided that all obligations are repaid on time.
3. The number of loan enquiries
Every enquiry about a loan or borrowing submitted to a bank or another financial institution is recorded at BIK. Too many enquiries in a short period suggest potential financial difficulties, which lowers the points assessment. That is why it is worth avoiding submitting many applications at once. Usually, when handling my clients’ loans, I submit two applications to carefully selected banks, keeping the third in reserve.
How to build creditworthiness?
Building creditworthiness is a process that requires planning and responsible money management. To understand how to build creditworthiness, you need to take several aspects into account.
First of all, you should ensure stable and regular income that banks consider reliable. The higher and more stable your income, the greater the chance of a positive lending decision. It is also important to limit fixed expenses of a recurring nature (such as subscriptions or leasing). The greater the difference between income and living costs, the higher the creditworthiness.
It is worth noting here that there is no need to live like an ascetic. When I explained what creditworthiness depends on, I used a certain simplification: income – costs = maximum monthly loan instalment. To assess creditworthiness, however, banks will not take your actual living costs. They will adopt costs set by themselves, depending on the town you live in, your housing status and the size of your flat.
If you are worried about how to get a mortgage for a home and feel that you may have a problem with your creditworthiness, it is worth repaying existing obligations or lowering their instalments through a new consolidation loan over a longer period. Before you take any steps, however, you need to check your financial situation. And how do you check your creditworthiness for free? You need to contact an experienced financial expert.
I will not only tell you how much of a loan you can count on, but I will also explain to you in detail how to get a loan for a flat or a house. And if your situation does not allow you to carry out your plans, I will advise you on how to build the creditworthiness that will make it possible.
It is worth mentioning that when a bank calculates creditworthiness, it does not look at the debt on your credit card, but at the limit granted. This means that if you have a credit card with a limit of 10,000 PLN but do not use it, the bank will still count that card when assessing your creditworthiness.
Which sources of income do banks accept? Can I get a loan without an employment contract?
Sources of income are one of the key elements taken into account when assessing creditworthiness. Banks analyse their amount, regularity and stability to assess whether the borrower will be able to repay the obligations. For income to be accepted, it must meet the requirements regarding the legal form of employment and the minimum period of receipt, and it must be paid into a bank account.
When planning how to obtain creditworthiness, the question arises of how long you need to have an employment contract in order to get a loan. If it is an employment contract for an indefinite period, then a minimum of 3 or 6 months (in some cases even 1 month). A fixed-term employment contract must have lasted at least 6 months and, in most cases, at the time of submitting the loan application it must still have at least another 6 months to run.
A contract of mandate usually has to have lasted 12 months. There are two banks that accept contracts of mandate lasting from 6 months. There are also some, however, that count income from a contract of mandate only in part (60-70%).
Business activity must have been running for 24 months, must not have recorded an annual loss, and you must not be in arrears with taxes or ZUS (Poland’s social-security institution) contributions.
And what are the requirements for other sources of income?
If, however, you have neither a job nor a business and support yourself in another way, there is still a chance that your income will be accepted by the bank.
- Property rental – the rental period usually overlaps with a contract of mandate (from 6 to 12 months), and 75% of the income is counted. It should not, however, be your only income.
- Working abroad is a very complicated matter. Practically every bank that accepts this income treats it as additional. This means that the second borrower must work in Poland, and the income from abroad may not be higher.
- Other accepted sources of income include, for example, income from agricultural activity, retirement pensions, disability pensions, a seafarer’s contract, a management contract or dividends. The important thing is that they are documented and regular.
Banks take different approaches to assessing individual sources of income. To work out how to get a loan, it is worth consulting a credit expert who will help you choose the right offer and prepare the necessary documentation. Stability and documentation of income are the key to a positive lending decision. Get in touch with me, and we will talk about how to build creditworthiness in your case.
How to take care of a good BIK record?
A good report at BIK (Poland’s credit information bureau) is the foundation of financial credibility in the eyes of banks. Regularly looking after your credit history can significantly improve your score and increase your chances of favourable loan terms.
The most important element is the timeliness of repaying obligations. Even small delays in payments can have a negative impact on the score, especially if they exceed 30 days. That is why it is worth setting up automatic direct debits or calendar reminders to avoid accidental delays. To put it simply, the length of the arrears matters more than the amount (although the amount is taken into account too).
The next step is to avoid excessive debt. Having too many obligations at once can be seen by banks as a risk of over-indebtedness. Remember that a credit card – even an inactive one – is also a form of credit. You may not be using it now, but all it takes is activating it in the app and you can already use the limit.
It is also important to keep the number of loan enquiries under control. Every enquiry leaves a trace at BIK, and too many in a short period can lower the score. That is why it is worth considering submitting a loan application only after carefully analysing the offer, and not clicking on loan applications in your banking app out of curiosity. If you want to check your creditworthiness, get in touch with me.
How can I check whether I’ll get a loan?
A single BIK report costs around 50 PLN, but you can buy an annual package (in which case one report works out at about 25 PLN). Regularly checking your BIK report will help you monitor your situation and react quickly to any errors or inaccuracies. Once every six months you can download the free statutory information to make sure that your credit history is in good shape. The BIK report is transparent and includes your points score, whereas the statutory information does not contain a score, only raw data.
What to do when you stumble on a loan repayment?
Anyone can find themselves in a situation where repaying a loan becomes a difficulty. Unexpected expenses, loss of income or other financial problems can lead to delays in payments. Repairing your credit history may be possible. The key, however, is to act quickly, which will allow you to minimise the negative consequences for your credit history and your BIK score.
The first step is to contact the bank. It is worth reporting the problem before the arrears grow. Banks often offer solutions such as loan holidays (suspending instalment payments for a few months), extending the loan period or renegotiating the terms of the agreement. This shows that you treat your obligations responsibly. If arrears have already occurred, try to settle them as soon as possible. Delays of more than 30 days are especially dangerous, because they lower your score and will be recorded at BIK as a negative entry that will stay with you for a very long time (at least five years, if not more).
The next step is to analyse your household budget. Look for ways to cut your spending or increase your income in order to avoid further delays. You can also consider consolidating your loans, which will allow you to combine several obligations into one lower instalment (repaid over a longer period).
How to clean up your BIK record after neglecting repayments?
If, however, you have not managed to rescue the situation and you have repayment delays exceeding 30 days, repairing your credit history awaits you. First, settle all overdue obligations. Only then can you begin the process of improving your BIK report.
The first step in improving your record at BIK can be taken only after a loan has been fully repaid and closed. To do this, you have to submit an application to the bank to withdraw your consent for the processing of your data at BIK by that bank. Remember that this applies to loans that have already been fully repaid. It must be noted, however, that if your arrears exceeded 60 days, BIK will still have the right to process them for another 5 years. If the arrears did not exceed 60 days, the entries will be hidden within a month or two.
If you see errors in your BIK report (e.g. an already settled arrear), you can file a complaint directly with the bank responsible for the entry. The bank is obliged to report the data update to BIK within 7 days of correcting the error. Admittedly, a negative entry stays at BIK for 5 years and there is nothing you can do about it, but during that time it is worth trying to build a new, positive credit history. You can do this by using small loans that you will repay on time. These must, however, be loans granted by a bank, not by lending institutions.
If you don’t know how to clean up your report or how to write the application, you can consult a financial planner. Such help can speed up the process of improving your situation at BIK. A good personal-finance specialist will know how to get a loan even if the client ran into problems in the past, although sometimes the recovery process can take years.
Regularly checking your BIK report and ensuring on-time repayments is the key to avoiding such problems in the future. Even if difficulties arise, quick action can minimise the negative effects.
Summary
Creditworthiness and credit history are two key elements that determine whether a bank will trust you as a customer. Knowing these two concepts is the key to how to get a mortgage for a home. High creditworthiness allows you to obtain larger loan amounts on favourable terms, and a positive history at BIK builds your financial credibility. Achieving these goals, however, requires a responsible approach to finances and conscious management of your obligations.
How to build creditworthiness? You need to have income that the bank will accept and to reduce your obligations at the point when you want to take out another loan. Repaying obligations regularly, avoiding excessive debt and monitoring your own financial situation are the foundations of success. It is also worth remembering that every step in building your credit history matters – even small delays can have a negative impact on the score. In turn, a lack of any credit history can be an obstacle for people applying for a loan for the first time.
If difficulties with repayment arise, the key is to act quickly. Contacting the bank, restructuring your obligations or consolidation can help you avoid negative entries at BIK. In the case of problems with your report, it is also worth knowing how to update or clean up your data at BIK in order to improve your situation.
Consciously looking after your creditworthiness and your history is an investment in the future, one that opens the door to making financial dreams come true – from buying a flat to growing your own business. Every step in this direction matters and brings tangible benefits.
In brief
Creditworthiness and credit history are key elements that determine your financial credibility in the eyes of banks. Creditworthiness means the ability to repay obligations, while credit history is a record of your past financial actions, such as repaying loans or credit cards. Both of these aspects affect the banks’ decision on whether to grant a loan, as well as its terms, such as the interest rate. Building creditworthiness requires stable income, control over spending and a responsible approach to financial obligations.
To improve your creditworthiness, the first thing you need to do is ensure stable income accepted by banks. This can be an employment contract, a contract of mandate, business activity or another form of obtaining income that is fully legal and confirmed by the tax authorities. It is also worth reducing fixed obligations and avoiding excessive debt.
In this process, credit history is also important – regular, on-time repayment of obligations builds a positive assessment at BIK (Poland’s credit information bureau). It is also worth keeping an eye on the number of loan enquiries you submit, which can have a negative impact on the score. A lack of any credit history can be an obstacle, which is why it is worth starting with small obligations, such as instalment purchases.
If difficulties with loan repayment arise, you need to act quickly – renegotiating the loan terms, loan holidays or consolidating obligations can help you avoid negative entries at BIK. Conscious money management, regular monitoring of your BIK report and taking care of a positive credit history open the door to better financial terms and to achieving goals such as buying a flat or growing a business.
Key concepts
Creditworthiness, credit history, BIK (Poland’s credit information bureau), BIK score, BIK report, sensitivity analysis, creditworthiness calculator, credit expert, BIK statutory information, lending decision, timeliness of repayments, number of obligations, variety of obligations, number of loan enquiries, building creditworthiness, regular income, consolidation loan, risk of over-indebtedness, delay of more than 30 days, lending institution, financial planner, form of employment.