All borrowers want the lowest interest rate and flexible loan terms. However, many forget that creditworthiness is the key factor. Three clues show how this can be improved. The creditworthiness is usually checked using an elaborate scoring procedure. The creditworthiness or creditworthiness plays an important role with every borrowing. It decides whether you will receive a loan approval and under what conditions. Your creditworthiness reflects your payment history and shows how you can deal with debt.
When applying for a loan, your credit record score and your income for the past three months are always asked to determine your creditworthiness. Your work status will also be checked. If these three points do not meet the bank’s credit rating criteria, additional loan collateral is often required. Below you will find information so that you can score in these three areas and receive the best credit conditions.
How you can improve your credit record score
credit record (protection for general loan protection) is the largest credit agency in Germany, which issues a so-called credit record score for every borrower. This rating includes data about your payment behavior for purchases on target as well as for loans. If you have not paid your debts on time in the past, you will receive a negative entry at credit record. This worsens your credit rating. You can conduct a free credit record self-assessment once a year and view your credit record score. You can use this information to act and improve your creditworthiness.
The exact evaluation criteria for the credit record score are not published. However, the following tips can help you improve your creditworthiness from credit record’s perspective:
- If some data is entered incorrectly, you can request a data correction directly from credit record.
- Cancel checking accounts and credit cards that you are not actively using. Too many open, unused accounts can make you feel like you’re transferring money back and forth for a dubious reason.
- A single loan is rated better at credit record than several open loans. If you repay multiple loans, consolidate them and reschedule them with a cheaper loan. Online portals such as Financer.com/de can help with this.
- Avoid defaults. If you have already received two reminders for your open invoice, this will be entered negatively by credit record.
- If you are in a financial constraint, you should always speak to your lender first to adjust your rates or term.
Income is considered the primary loan security
A second important point is your income. It is often considered the primary loan security when lending. The loan agreement often stipulates that the lender can access the borrower’s salary in the event of default. Always make sure that your income is sufficient to pay off your debts. If not, ask for a raise or look for other ways to make money on the side.
Stable employment as an important anchor
Your employment relationship is also an important factor in checking your creditworthiness. To successfully obtain a loan, you have to be employed by your current employer for at least six months. If you are on a trial period or in a temporary employment contract, this can damage your creditworthiness.
Conclusion: pay attention to your creditworthiness
Now you know what to do to improve your credit rating. If you observe all three points, there is usually nothing standing in the way of a cheap loan.