What is a credit check?
The term creditworthiness means creditworthiness. So that the bank can lend you money for an installment loan, it is important for them to know whether you can and will repay the amount. That is why she carries out a credit check before taking out the installment loan. Your previous payment behavior and your economic situation will be assessed – on the one hand based on internal bank criteria and on the other hand based on your assessment at credit rating.
This credit check has a huge impact on the interest rate you receive: the higher the bank’s credit rating, the cheaper the interest rate it offers you. By the way: According to credit rating, only 9.4 percent of consumers have negative characteristics deposited with the credit agency that would make borrowing more difficult. This means that more than 90 percent are rated positively and can expect a low interest rate due to their good credit rating.
What is checked during the credit check?
If the bank would like to check your creditworthiness, personal data such as marital status, job and place of residence will be requested first. These provide information about payment behavior in your living environment or for people with similar professional and family status. In addition, economic information, for example about company investments, and information about previous payment behavior have an impact on creditworthiness. Above all, it is checked how reliable the customer has been in the past with repayments or whether there have been payment irregularities. The bank requests this data from a credit agency such as credit rating.
The more data there is about a customer, the more precisely a statement can be made about its creditworthiness. They serve as the basis for determining the credit rating, which represents the probability of the loan being repaid in full.
How banks calculate creditworthiness
When a credit request is made, the bank’s internal credit assessment criteria are used first. It is mostly secret which these are and differs from bank to bank. Because, according to the Federal Court of Justice, the scoring procedure is a business secret worth protecting. The exact calculation formulas therefore do not have to be disclosed.
However, it is known that income and existing liabilities make up part of the credit check. To do this, proof of income and bank statements must be presented to the bank. In addition, a credit agency – usually credit rating – inquires about the economic situation and payment behavior: This includes movements in current accounts, timely repayment of loans and leasing contracts and the number of credit cards.
A negative credit rating entry may only be made to the customer after two reminders. It must also be pointed out that an entry will be made at credit rating if the payment is not paid.
The credit check at credit rating results in a score that, together with the credit score determined by the bank, predicts the probability that the installment loan will be repaid. If the evaluation is positive, the loan is committed. If the assessment is negative, you will either not receive a loan or will have to pay a higher interest rate.