Creditworthiness: how to calculate and improve it

What exactly is creditworthiness?

Creditworthiness is an assessment of your financial situation in terms of your ability to repay a loan on time. The bank wants to establish whether, after covering current expenses and existing liabilities, you will have a sufficient margin left for the mortgage instalment. In other words, it is a forecast of repayment safety.

The assessment consists of two elements: the capacity to repay, that is the surplus of income over expenses, and creditworthiness in the sense of reliability, that is how diligently you have repaid liabilities in the past. The bank checks this second element mainly at the Credit Information Bureau.

How do banks calculate creditworthiness?

The bank sets your income against living costs and existing liabilities, then estimates how high an instalment you can bear at the assumed interest rate and loan period. The calculation includes a safety buffer in case interest rates rise.

Factors that raise creditworthiness

• Higher and stable income, especially from a permanent employment contract.
• A longer loan period, which lowers the monthly instalment.
• No other loans and a low number of dependants.
• An additional co-borrower with their own income.

Factors that lower creditworthiness

• Other loans, credit and purchase instalments.
• Credit cards and account overdraft limits - even unused ones.
• Irregular or uncertain sources of income.
• Arrears and negative entries in your credit history.

What role does your BIK history play?

The Credit Information Bureau gathers data on your loans and how you repay them. The bank checks this history to assess your reliability. Importantly, having no history at all is not always favourable - the bank then has no basis to judge how diligent you are.

A positive history, that is liabilities repaid on time, works in your favour. Negative entries, such as repayment delays, can lower your score or make it harder to obtain a loan. That is why, before applying, it pays to pull your own report and see what the bank sees.

How do you improve creditworthiness before applying?

Creditworthiness is not a fixed value - you can influence it before you submit an application. Below are the most commonly effective actions.

Not all actions are appropriate in every situation. For example, extending the loan period increases the total cost of interest, so it pays to consider the side effects of each step.

How does the form of employment affect the assessment?

Banks treat sources of income differently. A permanent employment contract is usually assessed most favourably, because it signals stability. Self-employment, civil-law contracts or income from abroad are accepted, but the bank may require a longer period of earning it and additional documents.

If you run a business or work on temporary contracts, it pays to prepare for more detailed verification. Well-organised income documentation and a stable history of receipts into your account make it easier for the bank to give a favourable assessment.

Is it worth using a creditworthiness calculator?

Creditworthiness calculators give a quick, indicative picture of the amount you can count on. This is a good starting point for establishing a realistic price range for flats. Remember, though, that the result is approximate - the final decision is made by the bank after a full analysis of the documents.

Treat the calculator as a guide, not a guarantee. Different banks use different methodologies, so results can vary significantly between them. It pays to check the offers of several institutions rather than relying on a single estimate.

Summary: how to look after your creditworthiness

Creditworthiness determines the mortgage you can count on, so it pays to look after it in advance. Start with a review of your own finances: count your income, list your liabilities and check your report at BIK. This will show where you have room to improve.

The most effective actions are repaying small liabilities, closing unused cards and limits, and clearing any arrears. Also consider the loan period and a co-borrower. A well-prepared application increases not only your chances of getting a loan, but also your chance of more favourable terms.