What is a credit check and how does it work?

The creditworthiness check takes place on the part of the lender in order to tap the creditworthiness and if necessary the collateral of the borrower before granting the loan. For those who have negative entries in the Schufa, has no regulated or too low income and / or can have no collateral, which is rather a wobbly candidate for the bank or another financial institution. However, those who are free of debt, have a fixed and high income as well as not otherwise financially ill, are credited with a higher credit rating, a better Schufa score and other positive attributes – a plus for borrowing.

 

Creditworthiness check: how is the credit rating rated?

Creditworthiness check: how is the credit rating rated?

The credit rating means in the jargon of the bank the personal, especially the financial situation of the customer, who requests a loan. The credit rating is high if the customer is financially secure and can in all probability pay the repayment installments stipulated in the loan agreement regularly and in full. If the credit rating is rather low, the risk of defaults or similar complications is higher. In the worst case, this can lead to a rejection of the loan application; or at least higher interest rates designed to absorb the bank’s risk. In addition to the pure figures, the credit check also assesses job security – civil servants are thus better off than, for example, freelance artists.

 

Attention to old and wrong entries

credit check

The term Schufa will be used by anyone who informs themselves about their credit, creditworthiness and creditworthiness. The Schufa is the largest and most influential credit bureau in Germany; It stores records on financial conditions, loans and above all on financial losses of individuals, entrepreneurs and companies. Therefore, as a potential borrower prior to the loan request and before the bank’s credit check, you should check your details with the Schufa. If you find only positive entries in your data (according to Schufa, 90% of all entries are positive) as well as no outdated data, which are already time-barred, then everything is fine. For old negative entries or already paid new debts, order the deletion of the data.

 

Abstract on the terminology

The creditworthiness check is the analytical examination of the personal and economic circumstances of the requesting customer of a bank, that is: the possible borrower. This analysis is used to assess the risk to the lender when lending. The result of the creditworthiness check is decisive for the yes or no in the case of the credit inquiry.

 

New repayment modalities through credit monitoring

New repayment modalities through credit monitoring

The credit rating initially determined will not be accepted by the Bank or any other credit institution as a standing position for the life of the loan. Therefore, after the credit check and the subsequent lending follows the so-called credit monitoring. If the circumstances of the borrower change – whether for the positive or the negative – the bank can change the terms of payment. Especially with negative developments (loss of employment, divorce, accident, etc.) that is less nice. With positive developments (promotion, inheritance, Lottogewinn, etc.) the bank can even lower the interest rates.

 

Show everything and see all points

Show everything and see all points

As a potential borrower, you should not hide assets or assets, as well as hide negative points that could affect your credit rating. Bring in all the information requested by the bank. In return, you also require transparency at the bank and its credit check. The credit institution should disclose the various items and criteria involved in the credit assessment.

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