Only in 2019, Poles’ home budgets were credited with over USD 31 billion. I’m talking about money from a 500+ benefit. How will this additional income affect the financial situation of Polish households? What has changed in the context of the creditworthiness of families receiving the benefit?
How does the Family 500+ program work?
The 500 Plus program has been operating since 2016, although a year ago – in 2019 – its form has changed slightly. Initially, a benefit of USD 500 was granted to the second and subsequent children. Funds for the first child could only be obtained if the family’s income did not exceed the fixed height criteria. The extension of assistance and the equalization of rights in receiving benefits occurred on July 1, 2019. Since then, the benefit is granted to every child, including the first, and there is no income criterion. In 2019, 6.8 million children up to 18 years of age used it.
Family 500+ program – changes in financial management
Research conducted in 2017 by the Credit Information Bureau and the InfoMonitor Economic Information Bureau clearly show that the money from the Rodzina 500+ program has helped stabilize the financial and credit situation of many Polish families. 17% of respondents said that thanks to additional financial support they were able to reduce the value of past due credit obligations. 12% of them managed to settle credit obligations with the help of 500+. In turn, the financial situation of as many as 27% of the respondents has improved so much that they do not have to finance their daily expenses.
This is one side of the coin. On the other hand, higher household income could mean improved creditworthiness. Is this really the case? How do banks calculate their creditworthiness in the context of additional revenues from the 500 Plus program?
How is creditworthiness calculated?
To start with, it’s good to know how creditworthiness is calculated at all. Banks take many parameters into account; each institution uses its own indicators. These can be divided into two basic groups. The first is the assessment of overall credit risk. The second is the borrower’s assessment, where the main indicators are: the amount of permanent income, type of employment, amount of expenses, credit history of the borrower and his age.
Does 500+ increase creditworthiness?
There is no clear answer to this question – it all depends on the lender and the type of liability. Generally speaking, it can be stated that banks and non-bank institutions take into account 500+ benefits when granting cash loans, usually short-term ones. As we can see from the calculation of creditworthiness, 500+ increases the amount of fixed income.
However, the benefit is not taken into account for mortgages. It is quite correct to justify that 500+ is a benefit granted temporarily. Therefore, it cannot be taken into account as collateral for long-term loans – e.g. 30 years.