Creditworthiness is an important factor when applying for a loan. Especially for larger loans, banks scrupulously check the creditworthiness of the applicant. A common reason for a rejected loan application is credit rating issues. This is annoying and can derail dreams like a vacation, that new car or even home ownership. As a consumer, however, you have the opportunity to positively influence the rating at banks. How this works is explained in this article.
How do banks evaluate creditworthiness?
Avoiding problems with credit
Banks use the services of the credit reporting agency Schufa Holding AG to assess your creditworthiness. Many consumers wonder what exactly Schufa is? This is a service provider that stores information on the payment behavior and creditworthiness of German consumers.
Banks access this information when you apply for a loan. The banks do not receive any specific information, but only the SCHUFA score, which is given as a percentage. Based on this score, a risk assessment of the loan is then made. On the other hand, you have the option of obtaining a SCHUFA credit report. This shows what your current rating is and exactly how it is made up.
Getting your SCHUFA record expunged
It happens time and again that an incorrect entry at SCHUFA negatively impacts one's credit rating. In such a case, it is possible to have the false negative SCHUFA entries deleted. If they are entries on bills that you have already paid, you must ask the company to delete the entry from the SCHUFA. If, on the other hand, the entries are erroneous, direct the request to SCHUFA. It can also help to have an attorney do these tasks for you.
Avoid excessive credit applications to banks
One factor that negatively affects your SCHUFA score is an excessive number of credit inquiries. However, this only applies when you make credit inquiries directly to banks. Every loan application is stored with SCHUFA. If these requests pile up in a short period of time, it negatively affects the score.
If you still want to sift through different loan options, it is a good idea to use a loan comparison portal on the Internet. You can compare concrete credit offers on these platforms without triggering SCHUFA entries. These comparison portals also have the advantage of giving you access to many banks and their loan options. Thus, it is possible to compare the terms of different banks at the same time. This is one way you can find loans with favorable terms. On the other hand, you also have the possibility to influence the loan characteristics and thus find a loan what fits your ideas.
It is also advantageous that you can easily apply for low-cost financing online. So going to a branch is no longer necessary either. In this way, a loan application is possible in a short time from the comfort of your home sofa.
Prevent negative factors on your SCHUFA
If you want to avoid problems when applying for a loan, you can also take preventive action. Here's how too many bank accounts and credit cards negatively affect your SCHUFA score. So it makes sense to cancel second accounts and excess credit cards. In addition, you should settle outstanding bills that are visible in the SCHUFA self report. These actions automatically improve the SCHUFA score.
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