Many loans and credit companies check the credit history of their clients. At the same time, many people, especially those who have not made commitments in the past, are unaware that there is such a thing as a credit history. In this article, we’ll explain briefly what a credit history is, when and why it is important, and how you can build it.
What is credit history?
In short, the credit history is the history of your obligations. Most of the information about your financial obligations goes to the Credit Information Bureau, or BIK for short. This office stores information on financial commitments incurred, including in various banks. Thanks to this, bank X is aware of your previous and current loans, e.g. at bank Y. For banks, such knowledge is very useful, because thanks to this they can refuse to grant a loan to e.g. a person who in the past had a problem with paying off their liabilities.
When we talk about credit history, it is worth noting that many people confuse this term with the slogan “creditworthiness”. It is worth noting that these are two completely different concepts and should not be confused with each other:
– Credit history is, as we explained earlier, a list of a person’s previous financial obligations and how they dealt with their repayment.
– Creditworthiness is determined on the basis of income. Its purpose is to determine whether the person can get the loan he is applying for or whether he can afford to pay back the loan installments.
What is a good credit history and how to build it?
A good credit history really means paying off your financial obligations on time. The type of commitments does not matter. It can be ordinary credit, or it can be some installment equipment. It is important to make all payments on time – it will result in having a good credit history in the future.
If we’re talking about building a good credit history, there are really a few tips you can use:
– Start as soon as possible – the sooner you start building creditworthiness, the better. Today, many stores offer, for example, 0% installments. You can use such offers to start building a positive credit history.
– Start with small loans – you don’t have to take large loans immediately. You can start with small amounts, e.g. taking a kettle for PLN 150 in installments. These little things have a positive impact on your credit history.
– Be sure that you will be able to pay off each installment on time – it is important because otherwise, instead of building a good credit history you will build a bad one.
The importance of credit history
Some people don’t know why credit history is so important. After all, banks are incl. determine creditworthiness on the basis of income. At the same time, it’s worth noting that a positive credit history is important when you apply for a larger loan than ever before.
If you want to borrow a few hundred zlotys, take some cheap equipment in installments, you can do it even without a credit history. The problem begins when you need to take a larger loan or mortgage. In this situation, not only your creditworthiness is important, but also a positive story. It is a signal that you managed to pay your debts on time, so you will probably be able to pay off new debts.
Why should you start now?
Many people do not think about the future, they do not think that in a few or several years they will want to take, for example, a mortgage. The truth is that at any time in your life there may be a situation in which you will need to take a large loan. That’s why it’s better to be prepared and start building your credit history as soon as possible. Start by taking small loans, loans or installment equipment. Thanks to this, you will be able to apply for larger loans in the future.