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Loan application: When do banks view loan seekers as creditworthy?

Whether it is a new car, the financing of the vacation trip or the payment of the costs for a move: Nowadays, loans are used in a variety of ways. Despite the currently extremely low interest rates, banks are by no means frivolous in granting their loans, so that some consumers fail when they request a loan. This raises the perfectly legitimate question of when loan seekers should actually be considered creditworthy from the banks’ perspective.

Creditworthiness and creditworthiness as a basic prerequisite for lending

Creditworthiness and creditworthiness as a basic prerequisite for lending

Apart from the fact that credit institutions may only grant loans to persons of legal age, so that a so-called creditworthiness is required, the most important thing when granting a loan is that the lender classifies the borrower as sufficiently creditworthy. There are several prerequisites that, in principle, regardless of the bank, must be met by any loan seeker who ultimately wants to have an X loan amount. The fact that installment loans in particular are in some cases already offered for less than 2.5% in interest often has a very positive effect on creditworthiness. After all, the interest portion is only a small part of the total loan amount, so that the financial burden in the form of monthly installments for the customer decreases and thus more often shows a positive balance when you perform an income and expenditure calculation. But even if banks give favorable interest rates, the creditworthiness check carried out by the credit institution is still ahead of the loan commitment. Only after this process has been completed can the bank provide its customers with information as to whether the loan application made is approved or has to be rejected.

Creditworthiness is primarily assessed using the credit score of the credit agency

Creditworthiness is primarily assessed using the credit score of the credit agency

For most German banks, the basic requirement for lending is that the customer has a positive score. This value is determined in particular by credit agencies such as credit bureau so that the lender can see at a glance whether his customer – at least from the credit agency’s point of view – has sufficient creditworthiness. By far the leading credit agency in this area is credit bureau, which most credit institutions use. In addition, there are other similarly working credit bureaus, which include the following in addition to credit bureau:

• credit reform
• Infoscore
• Arvato

However, the data about customers stored in this way in credit bureau or another credit agency is by no means only used by credit institutions for viewing, but other companies are also increasingly rating their customers’ creditworthiness based on these data and figures. For example, the credit bureau data is requested by telecommunications companies, leasing companies or insurance companies. Even those who want to rent a house or apartment these days are often asked by the landlord or the relevant broker to provide credit bureau information.

Negative entry has a serious impact on creditworthiness

Negative entry has a serious impact on creditworthiness

The horror scenario of every loan seeker is certainly a negative entry in credit bureau, because this almost always leads to the bank rejecting the loan request. This results in a negative score in such cases, which often means that the bank does not regard the customer’s personal creditworthiness as sufficient. However, there is also a solution for such cases, namely so-called loans without credit bureau, where the lender deliberately avoids asking the credit bureau or another credit agency so that any negative entries cannot have a negative impact on the customer’s personal creditworthiness.

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