Anyone wishing to benefit from a loan must have an adequate credit rating. No bank in the world will lend money to someone because he is a nice person. The same mechanism applies outside of financial institutions.
All creditors fear that they will not get back the amount they have lent, along with compound interest. The Latin term creditworthiness means nothing else than creditworthiness.
How is the credit rating of a loan calculated?
This is assessed by the financial institutions from two perspectives: on the one hand via the credit bureaus and on the other hand about personal economic conditions. The credit agencies assess past payment behavior and draw conclusions from it. The personal economic situation gives an indication of the current state when the contract was concluded.
With the Credit Bureau to the scores
The largest data collector in Germany is Credit Bureau. Almost every German is listed with her. For example, anyone who signs a cell phone contract or orders from a mail-order company is listed in the databases. That is why the decision-makers of the financial institutions first look at the creditworthiness of Credit Bureau. The credit agency determines several industry-specific scores that indicate the likelihood that the creditor will meet its payment obligations.
The highest score is 100 percent. However, this is by no means given because sudden illness or unemployment can affect everyone. How exactly the credit rating is calculated at Credit Bureau is a closely guarded secret. Nevertheless, there are some criteria that can lead to negative creditworthiness and make lending unlikely. Anyone who does not pay an installment or an invoice despite being asked again will receive a negative entry at Credit Bureau.
This destroys the relationship of trust in the economy and regularly leads to a negative credit rating. Frequent credit inquiries or a large number of current obligations can also give rise to doubts about a person’s liquidity and lower their creditworthiness to a low score. Credit Bureau only advises to always fulfill all obligations in accordance with the contract and on time.
Your own economic situation
The money houses also want to get an insight into the current personal situation before granting a loan. The interaction of income situation and obligations is essential. The repayment can only be successful if a positive amount remains at the end of the month to pay the installments for a loan.
The banks proceed differently when assessing the economic situation. There is some leeway for borrowers. In some cases, assets are included in the credit rating as collateral. In this way, a full savings book or a share portfolio increases the credit rating.
This is how a check of the money houses works
The credit check is carried out digitally almost without exception. With just a few keystrokes and mouse clicks, all data can be entered and an algorithm decides on the granting of credit. In just a few seconds, consumers receive offers on the World Wide Web that they only have to sign and send away. Bank employees mostly adhere to the recommendations of the computer programs.
However, this does not have to be the last word. Because the above-described scope beyond the Credit Bureau scores leaves a few possibilities. Supported by evidence of personal circumstances, a loan cancellation can often be turned into a promise. The creditworthiness also depends on subjective, but verifiable criteria.