You think you earn a lot, you have a contract of employment and you still can’t get a loan? Do you compare the situation of friends who do not have the best financial situation, and yet the bank granted them a loan for an apartment? Maybe the problem lies deeper. Have you heard of the credit rating? In this article you will learn what credit scoring is and why it is so important when it comes to granting financial obligations. See http://www.odider.org/installment-loan-bad-credit-online-request-an-online-installment-loan-now/ for an illustration
What is credit scoring?
Credit scoring is a special method used by banks to assess and know the result when deciding whether or not to grant a loan. In other words, bank scoring is an assessment of the credibility of a natural person or enterprise applying for a bank loan – it is a query about the result presented in the form of points. It is important to know that the greater the financial credibility of the applicant, the greater the chance of receiving an injection of cash.
How is financial credibility calculated?
Credit/bank scoring is carried out with the help of special programs, thanks to which the credit assessment result can be known very quickly. When looking for a comparison for scoring, it is worth recalling a new Polish high school-leaving examination. Readers who took this matura exam after the education reform remember perfectly how controversial the Polish language exam essay aroused. High school graduates had to properly fit the answer key to get the most points and pass the secondary school-leaving examination with the best possible result. It is similar with assessing financial credibility. Each lender has its own rating scale. If it takes into account various factors ranging from the length of employment, the type of employment contract, the age of the borrower, the purpose of the loan, even ending with the number of people living in the applicant’s home, it is not difficult to guess that in many respects we can get a good assessment, but at the same time we can lose.
Who uses credit scoring?
The assessment of creditworthiness is used not only by banks, but also by many other financial institutions. Scoring is used by companies providing long-term installment loans and quick payday loans, as well as KooKs. Each of them analyzes the client according to its own algorithm, hence many queries of the same people from different lenders. If we do not get financial support in one company, it is not a rule that our loan application will also be wasted. As we mentioned, usually such companies develop and use their own scoring, but also send an inquiry to external institutions. It is about testing the creditworthiness of the client in the databases of the Credit Information Bureau. One should know that BIK also uses its own scoring.
What is BIK?
To begin with, let’s remind what BIK is. The Credit Information Bureau, in short BIK is a company established by the PolBank Association and some commercial banks. The main activity of BIK focuses on the collection and processing of data of people using various financial services. BIK works closely with banks that provide information on the timely repayment by the customer or arrears. The database administered by BIK serves primarily various financial entities by presenting them with a reliable assessment of the financial credibility of a specific person.
Scoring BIK – compartments
If we have previously written that almost every financial institution has its own creditworthiness assessment score, let’s see what the socring ranges in BIK look like. Our BIK score is expressed in terms of between 192 and 631 points. The final result consists of:
- credit activity, i.e. how many financial liabilities we have incurred and paid so far,
- using credit limits, watch out for debit, i.e. negative account balance (lack of funds), exceeding limits on credit cards,
- the number of applications for loans in a short period of time, in other words the tendency to borrow.
In addition, it is also presented in a simplified form – stars. The scale is from 1 to 5 stars. According to the Credit Information Bureau on its website, the relationship between the points and the number of stars is as follows:
- From 192 to 279 points – 1 star
- From 280 to 367 points – 2 stars
- From 368 to 455 points – 3 stars
- From 456 to 543 points – 4 stars
- From 544 to 631 points – 5 stars
What affects BIK scoring?
To calculate creditworthiness, BIK uses a complicated mathematical rule. However, you can find out what the main factors, according to quantitative analysis, i.e. the financial position of a potential customer, affect a good credit rating:
• income obtained
• monthly maintenance costs (rent, utility costs, etc.)
• current debt, e.g. loans repaid, credit card debt, available limits, guaranteed loans
As for the qualitative analysis, i.e. checking all the data that has a large impact on the future borrower’s willingness to meet its financial obligations, the following factors are included in the assessment:
• personal characteristics such as age, marital status, number of dependents, housing and property status,
• education, work experience, occupation, position held
• credit history, which shows whether a given person has repaid earlier financial obligations