Creditworthiness: what factors determine it?
Answer: If you are considered creditworthy by a bank , it means that you are likely to repay a loan that you have taken out. The creditworthiness depends on various factors, but all are influenced and more or less clearly visible.
Factor 1: income
Of course, your personal income is elemental. That should be as safe as possible, so you should have a permanent job at best. Civil servants in particular have advantages here. In addition, the amount of your income also influences the creditworthiness. Both factors must be attested by certified salary statements and should necessarily be presented on own initiative in credit discussions.
Factor 2: wealth
Closely related to income is personal wealth. These include real estate, cash, current account balances or stocks. It also applies here that appropriate proof must be provided. These can be land register entries, title deeds or passbooks or account statements.
Especially in the case of real estate financing, it is important that there is a certain amount of assets from which part of the construction or purchase costs can be financed.
Incidentally, current loans are assets, but only in a negative sense. However, if you are already a borrower, you do not always have to be to your detriment. Those who regularly pay their installments and always behave reliably can positively influence their own creditworthiness. In addition, this strengthens your bargaining power over a bank, proving that you are taking your payment obligations seriously.
Factor 3: Schufa information
In addition, credit institutions use Schufa information to find out about their customers. The Schufa has a large number of detailed data on the creditworthiness of a large part of the German population and issues a kind of rating in the form of a Schufa score. In order to be able to check if there are any negative entries, you must apply for an insight. This is absolutely free once a year and can be very helpful.
If you discover that there are unsubstantiated entries, these can also be removed by application. All you need to do is submit a certified document proving the defectiveness of the entry. For more detailed information, we recommend the Consumer Service Center in Hanover, which deals specifically with the topic.
Factor 4: Account management
Not insignificant for your creditworthiness is your account management. The bank knows when, for example, direct debits were due to lack of coverage or how often you overdraw your account. If you have regular cash receipts and avoid the target range, you have a good chance of lending.
It is also not advisable to apply for a loan from several banks at once. This does not mean that you should not ask for different offers. It is highly advisable to hold talks with various banks to find a low-interest loan. Best task a reputable financing broker with this task, he knows in doubt significantly more banks and conceptual peculiarities of the respective banks. However, then really only one bank should be the actual loan application. Otherwise, your situation will quickly be in need and credit institutions will be less inclined to grant you the loan.
Summary of creditworthiness
Let’s briefly summarize what influences your credit rating. The central element is certified proof of your income and current financial position. Both are to be carried on own initiative already for the first discussions.
In addition, your behavior plays a role in the past. Anyone who has fulfilled all his payment obligations and rarely covers his account has a good chance of lending. If then with the Schufa also everything is fine and the loan application reaches only a single bank, lending is no longer in the way.