Do MFIs look at credit history?
Yes, lenders may obtain borrowers’ credit reports because banks and non-bank financial institutions are among the users of credit history bureaus (Article 6 of Law No. 2704-IV).
In addition, Law No. 1734-VIII requires a lender to assess a consumer’s creditworthiness before entering into an agreement. Credit history is one of the data sources used in the creditworthiness assessment — in particular, information about the fulfillment of previous credit obligations is taken into account.
It is not possible to hide previous loans from a lender — all data is recorded by credit history bureaus.
Credit history check: what exactly does an MFI see?
A credit history contains information about a borrower’s credit obligations and how they were fulfilled.
Article 7 of Law of Ukraine No. 2704-IV defines a fairly broad list of data that may be included in a credit history, including:
- Active loans
- Overdue payments
- Payment discipline
- Court decisions.
A credit score is also generated separately — a summary indicator calculated by the bureau on the basis of the credit history. It helps an MFI quickly assess a borrower’s payment discipline and risk level without reviewing every item in the credit history in detail.
Can I get a loan with a bad credit history?
Yes, it is possible to obtain a loan from an MFI with a bad credit history. Microfinance companies often work with borrowers who are rejected by banks because of a negative credit history. MFIs assess applications comprehensively, so the existence of overdue payments does not always mean automatic rejection.
At the same time, a bad credit history reduces the chances of approval, and the credit limit may be lower.
For more details on where you can get a loan with a bad credit history, see our separate article.
How to check your credit history
Law No. 2704-IV establishes the right of every citizen to review their credit history.
You can obtain this information free of charge once per calendar year, as well as in the event of a lender’s rejection. To do so, you need to contact UBKI or PVBKI through the official website. The bureau must provide the relevant information within two business days after receiving the request.
If a person finds an error, they may contact the bureau and request that the information be checked and corrected.
Final summary
Because microfinance institutions are more flexible than banks and more often provide loans even to borrowers with overdue payments, many people wonder whether MFIs check credit history. In fact, every lender conducts such a check because information about previous obligations is one of the sources used to assess creditworthiness. Financial institutions have lawful access to this data, so it cannot be hidden.
Important to know: The information provided in this article is for informational purposes only and does not constitute financial or legal advice.