7 Things To Get Good Credit Score
Only those who can show a sufficiently good credit score will receive a loan with low interest rates. During the credit check, banks, savings banks and other credit institutions check: How high is the probability that a customer will repay his loan as planned? Banks do this because a loan default is very expensive for them. Obtaining unpaid installments means a lot of work. That is why banks check in advance how high the risk of default is and set the credit conditions accordingly. In some cases, it can also happen in this context that the loan application can be rejected if the risk is too high.
The focus is therefore on our ability to pay in the future. The more positive it is assessed, the lower the default risk. And the better the lending conditions can be. But which factors influence our creditworthiness?
When a private individual applies for a loan, they must provide a range of information about their economic situation. Certain data is used to check whether the potential contractual partner has a sufficiently good material credit rating. The current monthly net income, any additional income and assets are queried.
Because employees in the probationary period or with a fixed-term employment contract are at higher risk of falling income in the near future, they are rated worse in terms of creditworthiness.
2. Regular expenses
The income is compared with the regular payment obligations in order to be able to assess the economic creditworthiness of the applicant. So you should ask yourself what monthly fixed costs you can expect. The applicant can only repay the loan on time if there is enough money left after expenses have been deducted.
If the applicant’s economic creditworthiness is good, the next step is for credit institutions to consult information from other credit bureaus. These companies collect data at various points and make it available to credit institutions and other contractual partners if they have a legitimate interest and permission to do so.
3. Loans and Loan Requests
For example, the credit bureaus records existing financing and provides other credit institutions with information on whether the debtors are servicing existing credits, loans and leasing contracts on time.
The following applies to loan inquiries: If you obtain offers from several institutes, you should make sure that no “loan request” is made to the credit bureaus, but only a “loan condition request”. A condition request is not entered, so it does not affect the creditworthiness. The data on the loan request, on the other hand, is recorded and only deleted twelve months later.
4. Payment Practices
Monthly mobile phone bills, claims from online retailers, buying furniture in installments: those who do not pay outstanding claims or pay them too late are rated worse. So always check the payment deadlines. If the content of invoices is incorrect, they should be disputed immediately upon receipt. Then these open claims may not be recorded by the credit bureaus.
Of course, affidavits, arrest warrants and ongoing debt collection procedures also have an influence on personal creditworthiness. Even if the debtor meets the demands, this so-called negative information is still noted in the credit bureaus for three years. In the case of private insolvency proceedings, there is no longer an entry for ten years after the opening.
5. Bank details and credit cards
A large number of bank accounts tends to have a negative effect on the credit check. Unused checking accounts and credit cards should therefore be terminated. Even those who open current accounts frequently and only use them for a short time are rated worse by credit bureaus. Long contractual relationships with banks or savings banks, on the other hand, have a positive effect. Also good to know: If you use the partial payment function of your credit card , you risk a worse value in the credit check, because this information is also included in the credit bureaus database.
6. Amount of overdraft facility
Account holders should choose the framework for their overdraft facility (granted overdraft) as large as possible. It is recorded by the credit bureaus. The logic here: The higher the overdraft facility that a financial institution grants, the better the customer’s creditworthiness is assessed.
7. Living Environment
Consumer advocates criticize this approach, but the legislature allows what is known as geoscoring. Credit bureaus include information about the residential area in the calculation of creditworthiness. An address in a poorer part of the city can also influence the creditworthiness of those consumers who always pay their bills.
On the other hand, having a permanent place of residence and staying in one place for as long as possible has a positive effect on personal creditworthiness. Those who frequently change their place of residence are more difficult to find from the point of view of creditors, which leads to a point deduction in terms of creditworthiness.
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