Creditworthiness is an expression that is most often used in the context of assessing the chances of getting a loan. Particular attention is paid to one of its elements – the amount of earnings. While it is undoubtedly very important, this does not mean that you can also ignore other important factors that may be decisive for us.
We are talking primarily about credit history, which we tend to often forget, which can ultimately have unpleasant consequences. So how do you build a positive credit history? What are the rules for building a good credit history, and what affects it negatively? Can having an empty credit history harm us?
What is credit history?
Before we get into how to build a positive credit history, it is worth considering for a moment what it actually is. The credit history is a record of the debts that a person currently repays and has repaid in the past. It contains information about whether payments are made in a timely manner and if not, what is the delay.
From credit history, you can not only conclude whether someone is reliable and credible, but also whether, for example, they tend to incur many different liabilities at the same time. In Poland, the collection and storage of credit history are handled by a non-governmental organization called the Credit Information Bureau (Credit Checker). There are also several registers of debtors, however, unlike Credit Checker, they contain only negative information, and therefore do not disclose the entire credit history.
Each bank, when considering a loan application, requests Credit Checker for information about a potential borrower. Thanks to this, he can easily, quickly and transparently assess the probability with which he would pay off the debt on time.
Rules for building a credit history
Improving and building a good credit history is not something that can be done overnight. It’s hard to take any shortcuts in this regard. You just have to be consistent and patient, and also follow the rules below.
Build a credit history from a young age
Many people mistakenly assume that an empty credit history is not much worse than a positive history and will not prevent you from getting your dream loan. However, the reality is exactly the opposite – an empty credit history is not much better in the eyes of banks than a negative one. Even young people who have not taken any loans in the past because they did not feel such a need, and then applied for a mortgage can find out about it painfully.
A person who has no credit history is simply unpredictable for the bank. She may be a perfect customer, but she can also be extremely irresponsible and unreliable. In this case, the bank must assume the worst, because it can not afford to accept such a significant risk.
Therefore, one of the most important principles of credit history is to build it consistently and preferably from an early age. Thanks to this, if in the future we happen to be late with the repayment of some debt, it will not be very blatant against the background of a positive credit history carefully cultivated over the years.
Take care of timeliness and do not exceed the limits
On the one hand, this seems obvious, but on the other, it is worth mentioning. For our credit scoring (i.e. a score based on our credit history), the most important factor is the timely payment of liabilities.
Any delays in repayment of loans will destroy the effort put into building a good credit history. Of course, this does not mean that we have no right to make any mistake – the banks are aware that no one is perfect, and everyone can have a bad time. Therefore, several negative entries among the dozens of positive will not be a great catastrophe.
Not only delayed repayment of loans, but also exceeding the credit limits granted to us is to our disadvantage (although to a much lesser extent). Therefore, use them carefully and occasionally, not often. Continuous use of them will prove a very unstable financial situation.
We are also badly informed about the frequent submission of credit inquiries to many different banks, which is why they should be kept to a minimum. If we are wondering whether a loan would be granted to us in a given bank, instead of submitting the application, we can, for example, use the creditworthiness calculator, which we will probably find on the website of the selected institution.