The rapidly growing economy and growing consumer needs fuel the demand for additional financial resources. Increasingly, we reach for quick online loans, i.e. so-called payday loans. Non-bank loan companies are growing in strength, effectively competing with traditional banks, where obtaining a loan often involves going through a series of verification processes and meeting specific financial requirements. Clients undergo routine financial control at BIK or KRD. But are similar loan methods also used by companies that offer so-called “easy cash”? It turns out that yes.
What is Credit Check?
The Credit Check system gained popularity in 2016. It is a borrower verification system and allows non-banking institutions to quickly check the financial capacity of clients before signing a loan agreement. The Credit Check system has been implemented to avoid concluding contracts with consumers with an unclear or bad credit history. It allows you to check if the customer is not repaying other loans in parallel, presents the history of unpaid or late repayment obligations. Credit check is also indirectly a security buffer for the customer – it protects against falling into the so-called debt spiral in a situation when a borrower takes out a loan in one institution in order to repay his liability in another.
Credit Check policies
Credit Check operates on relatively simple and transparent principles. The system is based on cooperation with the Economic Information Bureau (BIG). The scope of BIG’s competence is similar to BIK (Credit Information Bureau) and KRD (Kajowy Debt Register). It consists in providing the lender with information on the consumer’s credit history. Credit check automatically rejects people who do not have the desired financial capabilities. With a negative credit history, we have little chance for positive financial verification. Sometimes, the complete lack of credit history is a reason for rejecting a loan application, even though we are clean as a tear and have no outstanding debt. This is because for a loan company we are a so-called blank card, institutions do not know whether such consumers can be trusted or not.
People who meet their loan obligations in a timely manner have no reason to worry – the Credit Check system does not go beyond clearly defined assumptions of operation, i.e. filtering customers who have unpaid credit arrears on their account. In other words, Credit Check is designed to show whether the consumer is or is not a debtor. The issue of having creditworthiness is already verified by another institution and not all loan companies use such information.
Do all companies use Credit Check?
Of course there are payday loans without verification. Not all loan companies carefully check their clients in BIK or Credit Check databases. Sometimes, you only need an income certificate to sign the relevant contract. However, in the ranking of popular payday loans, the overwhelming majority are loans filtered for their availability to customers. There are payday loans that are addressed to people who do not have any history or creditworthiness, but the loan amounts usually do not exceed $1,000.
Credit check is protection for both the lender and the borrower. Although the verification system may seem seemingly troublesome, it has been developed in the long run to increase financial security for both parties.