Creditworthiness: How can I improve it?

What does creditworthiness mean?

What does creditworthiness mean?

According to a general definition, creditworthiness means whether and how solvent a customer, a company or a state is. Those who are creditworthy will very likely meet their payment obligations reliably and in accordance with the contract.

Credit institutions, companies, but also people who take a permanent economic risk (e.g. landlords) check the creditworthiness of their business partners in order to protect themselves from default. As a rule, special credit protection institutions, so-called credit bureaus, carry out such a credit check. To do this, they collect and save various data about personal living conditions, income and assets and the payment behavior of consumers in the past. They then use special algorithms to determine a credit rating. The best-known value is the Credit Bureau score.

When is my credit rating checked?

A classic case is the loan request from the bank. Here, a credit check with a positive result is the prerequisite for obtaining the financing.

All companies and individuals may also check their creditworthiness before starting a business relationship, as long as there is a legitimate interest, which regulates § 29 of the Federal Data Protection Act (BDSG). It varies, up to what amount, for example, landlords accept the risk of default and from when they prefer to test their creditworthiness in advance.

Below we list business relationships for you that are likely to require a credit check:

  • Borrowing from the bank
  • Conclusion of a cell phone, internet, gas or electricity contract etc.
  • Conclusion of a private or commercial lease
  • Conclusion of a leasing contract
  • Purchase of goods in installments or on invoice (e.g. online shopping)

The creditworthiness is sometimes also checked during an ongoing contract, for example with installment loans. Here, banks can regularly test during the term of the contract whether the borrower is still creditworthy. Otherwise this would be a reason for the bank to terminate.

What are the consequences of high or low creditworthiness?

On the one hand, creditworthiness depends on whether you get a contract or a loan and, on the other hand, how good or bad the conditions are. Because the higher your creditworthiness, the more desirable you are as a customer. A low default risk, for example, is rewarded by banks with low lending rates.

Conversely, if you are not considered creditworthy, it will be difficult to get a loan or contract at all. Because for the other side it is then questionable whether you can really meet your payment obligations. Companies or credit institutions either do not take the default risk at all or they can pay dearly for it with high interest rates.

Am I creditworthy? How to find out!

According to Article 15 GDPR, every citizen has the right to receive free information about his creditworthiness once a year. To do this, you need to contact a credit protection institution. The best known is Credit Bureau Holding AG. Others are Creditreform Boniversum and Crif Bürgel. On their websites you will find the online application for credit information!

In our article on Credit Bureau self-disclosure, we explain how you can obtain your free Credit Bureau information.

7 tips: How can I improve my creditworthiness?

7 tips: How can I improve my creditworthiness?

Your creditworthiness decides on the lending and the associated conditions. For this reason, we recommend that you regularly check your creditworthiness and, if necessary, improve your creditworthiness with appropriate measures. In the following, we will show you how you can do this using 7 effective tips.

Check creditworthiness: Check your Credit Bureau score regularly!

Check creditworthiness: Check your Credit Bureau score regularly!

Every fourth credit report is statistically incorrect! The cause is usually outdated or simply incorrect data, which illegally worsens the credit rating and makes you no longer appear creditworthy. We therefore advise you to exercise your right to an annual free self-assessment, for example at Credit Bureau. As a contradiction, a letter to the credit agency with the request to delete the wrong or outdated negative data is sufficient.

Remain creditworthy: Pay all bills on time!

If you don’t want to risk your creditworthiness lightly, you should always pay your bills promptly. Companies do not have to report deferred payments to Credit Bureau. Don’t take the risk at all! Credit Bureau itself advises paying bills on time and reminders immediately, not to exceed credit lines and always repay debts in full. If payment difficulties do arise, it is best to immediately seek an open discussion with the creditor. Agreeing on deferral or payment in installments does not solve the problem straight away, but it can prevent a negative entry.

Keep the number of your accounts and cards clear!

The credit rating decreases with the number of accounts that you have with many different banks. You should therefore close accounts that you do not need. The same applies to unused credit cards. Here too, one or two credit cards are proof of trustworthiness. However, several suggest payment problems in the Credit Bureau logic. Incidentally, the Credit Bureau evaluates negatively that they have no account at all!

Creditworthy thanks to overdraft facility: Set up an overdraft facility, but do not touch it!

As a rule, Credit Bureau values ​​a generous overdraft facility as proof that the bank has confidence in you. Even if you do not need the overdraft facility, it will help you to improve your creditworthiness. Therefore, always choose the maximum discount rate, but do not touch it if possible because of the extremely high interest rates.

Creditworthiness despite credit inquiries: be careful when searching for financing!

The creditworthiness often drops surprisingly as soon as you are interested in a loan and start comparative inquiries from various banks. While consumers only want to find the cheapest offer, Credit Bureau suspects that banks will reject your loan requests. That makes your score sink. When making comparative offers, you should therefore always make sure that these are only “credit condition requests”. We already took this setting into account in our installment loan comparison.

Creditworthy despite the move: don’t change banks and domicile too often!

Changing the bank or the place of residence too often can lead the Credit Bureau algorithm to believe that you are working on concealing your identity. If possible, it is better to stay at the house bank longer than possible, instead of changing the bank every time you move.

Creditworthiness and 0% financing: stay away from supposed bargains!

What many do not know: The 0% financing of goods that is often offered by retail is considered a normal loan. If you have completed several 0% financing of this type, your credit rating will decrease! So think carefully about what you can pay in cash straight away and whether the supposed bargain is really worth it.

How is the credit rating calculated and by whom?

How is the credit rating calculated and by whom?

Banks and corporations evaluate your creditworthiness based on several factors. This includes data on personal living conditions and data on income and solvency in general.

These factors affect creditworthiness

The assessment of your creditworthiness depends on personal and material factors, which form an overall picture. The following data are used:

Personal data:

  • Gender, age, place of residence
  • Marital status, number of children
  • Occupation, duration of employment

Financial situation data:

  • Amount of work income and other income (e.g. rental income)
  • Amount of expenses (including rent, additional costs, possibly maintenance payments, loans)
  • Number of existing accounts and loans
  • Property (real estate)
  • current or previous personal bankruptcy, dunning procedures, collection incidents

Creditworthiness: How Credit Bureau & Co work!

Special credit insurance institutions commissioned with this, of which Credit Bureau is the largest and best known, check whether you are creditworthy. These collect both positive data on contractually paid installments and invoices as well as negative data on defaults, bankruptcy applications or entries in debtor lists.

For this purpose, Credit Bureau works with around 9,500 companies, including telephone and mobile phone groups, banks and savings banks, companies in brick-and-mortar and online retailing, and also energy providers.

In the creditworthiness check, Credit Bureau uses algorithms to create the so-called credit score using algorithms. This value describes the probability of a default. How it is calculated, however, remains the trade secret of the respective credit agency.

Credit despite payment order

There are consumers who have received a payment order from the responsible central dunning court. If the debtor does not file an objection on time, the order for payment will be enforced. Then a creditor can enforce his claim. A payment order not only has an impact on the consumer’s Credit Bureau, the notification also brings the consumer a negative entry and thus a restriction of his creditworthiness.

The negative entry in the Credit Bureau marks the debtor as a delinquent payer, which ultimately has a negative effect on a loan decision. If the consumer needs a loan, he has to face considerable difficulties.

The outlook

The outlook

Even if the consumer takes care of the dunning notice through financial compensation, he remains in Credit Bureau. He receives the note “done” but entry will still be visible for three years. However, many banks fundamentally reject a loan in spite of a payment order due to the rules they have created themselves. Even if the entry is seen as “done” or not, that doesn’t matter to the banks. The consumer was noticed negatively as a payer. Banks then remain suspicious of a loan despite a payment order.

In general, the consumer should know who wants a loan in Germany, whose credit rating must be sufficient. This means that he must have a regular income that is manageable in relation to the loan amount. If the payment behavior of the consumer is noticeable, the creditworthiness can be significantly reduced, with the result that there is no credit despite a payment order.

Nevertheless, the consumer can count on a loan despite a payment order if he observes a few things. The easiest way to get a loan despite a payment order is to name a solvent guarantor who has a sufficiently high income and a clean Credit Bureau. Anyone who submits the loan application directly with the guarantor increases their credit chances. The guarantor must not have pledged his or her income and must show a garnishable portion. The income must also come from a self-employed activity.

In addition to a guarantor, a property, a loanable life insurance, a saved building society contract or a new high-quality car are also considered security. The bank will take these items as a pledge and the owner will get them back when the loan is paid.

The Credit Bureau-free loan with a credit broker

The Credit Bureau-free loan with a credit broker

Basically, with a loan, despite a dunning notice, the following should be noted: if the loan seeker has no permanent position and therefore only a low income and then the dunning notice, it should be considered whether a loan is the solution. However, if the loan is a must, the customer can commission a credit broker. This professional group specializes in difficult lending. They also know banks that still grant a loan in a particularly difficult situation.

The credit intermediaries have loans from abroad in their portfolio, loans that do not require Credit Bureau. This means that the bank will not inspect Credit Bureau, and the loan will not be entered. The customer thus receives an anonymous loan. Nevertheless, in the case of a loan in spite of a payment order, care should be taken to ensure that the credit broker works properly. With regard to the seriousness of the situation, many credit intermediaries take advantage of this and rip their customers off with advance costs and prepayment. Then there is no credit but many other costs that further worsen the financial situation of the customer.

The customer should know that foreign banks do not query Credit Bureau, but still take a look at the public debt register. If the order for payment is already noted there, there is no simple loan from abroad either. The extent to which these banks recognize a guarantee under German law remains to be seen or should be questioned.

The Credit Bureau-free loans, as this type of loan is called, already have higher interest rates than a regular loan. Loan with a guarantor or other collateral should then be somewhat cheaper. Since the foreign loans are mostly only given as small loans of $ 3,500 and $ 5,000, one could assume that the effort involved in providing a guarantee and the provision of real estate are too much work. The credit intermediary should also know that.

However, if the customer has no permanent position and his income comes from a state benefit such as unemployment benefit or Hartz IV, this type of loan should not be an option for the consumer either.

The bank search

The bank search

In order to still get a loan despite a payment order, you should pay the payment order before applying for a loan and, if possible, in full. The entry remains in the Credit Bureau but the note “done”. This is how some banks recognize the creditworthiness. However, the majority of the banks will refuse the loan despite a payment order, and they see a loan approval as an increased risk of default. Here the consumer has to do preparatory work by looking for a provider who will grant him a loan, but this is associated with the risks of credit fraud and he should take care of his order for payment.

The commissioning of a credit broker who works seriously could be successful here. The customer does not have to go to different banks himself, but the agent does it for him. It also damages Credit Bureau again if some loan requests have been rejected.

The personal interview can be useful

The personal interview can be useful

Another situation for the customer arises when he can plausibly confirm to a bank that the order for payment was not lawful. He should know that claims that are not paid will persist for 30 years. The bank knows that too, but a face-to-face meeting could help. Here again the sentence applies, whoever sells well also receives something.

The opportunity to get a loan despite a payment order is made at the house bank. The customer is known there, they know their finances. If the order for payment had been wrongly issued and the customer has clarified this, the bank could agree to grant a loan with a smaller loan amount. With an online bank, the customer has no chance. An automated test procedure is usually used there, which already confirms a rejection when the Credit Bureau query is made.

Swiss loan without Credit Bureau without upfront costs [SOLVED | 11/2018 last post

Lending is an important business area for banks. If loan seekers are creditworthy, there are usually no problems with lending. Credit applicants demonstrate their creditworthiness through a permanent position with regular income and a clean Credit Bureau information. The banks place great value in particular on flawless Credit Bureau. If the Credit Bureau is negative, a loan application is normally rejected. The Credit Bureau is, so to speak, the be-all and end-all when it comes to lending. Consumers who have traded bad Credit Bureau through negative payment behavior do not get loans from German banks unless they can provide other collateral. An alternative is then to use a Swiss loan without Credit Bureau without any upfront costs.

What is the Swiss loan without Credit Bureau without upfront costs?

What is the Swiss loan without Credit Bureau without upfront costs?

The Swiss loan is so named because in the past Swiss banks granted German consumers non-Credit Bureau-free loans. Today the Swiss banks do not have a license and it is the only bank in Liechtenstein that is allowed to grant loans without Credit Bureau to German customers. Because so much is associated with the term Swiss credit on the part of German consumers, the Credit Bureau-free credit that comes today from Fine Bank in Liechtenstein is still called Swiss credit.

For a Swiss loan without Credit Bureau and no upfront costs, private credit intermediaries offer their services online. Banks that lend to customers even with a negative Credit Bureau were formerly mostly based in Switzerland. On the part of the bank, the loan is now secured through the income and permanent employment of the borrowers. The possible loan amount is not freely selectable. Either 3,500 or 5,000 dollars will be made available. The Swiss loan without Credit Bureau without upfront costs is intended to point out once again that the consumer who applies for a Swiss loan through a credit intermediary will not incur any upfront costs. It is important to know. Reputable credit brokers always create loan offers free of charge and without obligation. Commission for the brokering activities only accrues when a loan has actually been brokered. So in retrospect.

German consumers wishing to take out a loan without Credit Bureau should note that they can request a Swiss loan without Credit Bureau at no extra cost. Not everyone looking for a loan who wants to take out a Credit Bureau-free loan will get it in the end. However, only inquiries are free of charge.

A lot of time and effort can be saved if loan seekers who are not creditworthy do not first make inquiries to the credit intermediary. The banks abroad also have no money to give away. If you have no attachable income and a negative Credit Bureau, you will be just as unsuccessful with a loan application abroad as in Germany.

Hire a reputable broker

Hire a reputable broker

Loan seekers should take the time to apply for a loan. Before you contact any credit broker who promises credit even in difficult or hopeless cases, research should be carried out on the Internet to select “black sheep”.

If there is creditworthiness, it is easily possible to get a Swiss loan without Credit Bureau without any upfront costs through a credit intermediary. This loan will be more expensive than a comparable product from Germany. This is due to the higher interest rates charged by the bank and the agency fee charged by the credit intermediary.

The Credit Bureau-free loan is always appropriate when loan seekers cannot name a guarantor. If you only need a small loan that does not exceed 5,000 dollars, the Swiss loan without Credit Bureau and without upfront costs can be the perfect solution.