Anyone who applies for a loan must expect the applicant’s creditworthiness to be checked by the bank. Statutory regulations provide that so that nobody can get a loan that they can hardly pay back in their current financial situation – and of course, by checking the creditworthiness of an applicant, the lender also wants to avoid the risk of suffering financial damage due to a default. But what is important when checking creditworthiness?
The Credit bureau Score gives a quick overview of the creditworthiness
The Credit bureau Score is a quick way to find out the creditworthiness of an applicant. Consumers can request free information about their Credit bureau entries once a year in order to be able to better assess their creditworthiness. This option for free information is laid down in the Federal Data Protection Act and consumers should take it regularly to get a better impression of the development of their Credit bureau score. If you notice any errors in the Credit bureau directory about yourself, you should have them corrected – this can be done quickly with an inquiry to Credit bureau – so that they do not lead to a false bad creditworthiness in the future credit inquiry.
By canceling unnecessary accounts and credit cards, the Credit bureau score can also be improved, since a large amount of such contracts has a negative impact on it. Anyone who applies for a loan should only submit an application for the conditions to be disclosed – because anyone who already makes an application for a specific loan will be noted in the Credit bureau information – which will have a negative impact on the Credit bureau score.
Permanent employment increases creditworthiness
It is important for the banks that they get their loan repaid at the agreed rates. The fact that an applicant has a regular monthly income in a permanent position gives them security. Those who can submit corresponding proof of salary can increase their creditworthiness. This also applies to tax repayments, interest gains or the right to child benefit or care allowance, as it increases one’s own income. It is therefore not impossible to obtain a loan without permanent employment.
The creditworthiness of trainees, for example, depends on the amount of their training salary. It is also possible for trainees or students to take out a small loan. In the case of larger loan requests – for example in the case of construction financing – the creditworthiness can be increased if, for example, you submit a loan application with your spouse.
Because with two persons responsible for repaying the loan, the risk for the banks is reduced, which will accordingly be more accommodating when issuing a loan. A high proportion of equity or own contribution brought in by a building project can also increase the credit rating. Incidentally, the better an applicant’s creditworthiness is assessed, the lower the repayment interest: If the risk for the banks is low, this does not have to be compensated for by additional costs for the borrower.