Before a consumer can take out a loan from a bank , he has to take an important hurdle: checking his creditworthiness . Before the bank lends a certain amount of money to a consumer, they want to be sure that the debtor will then be able to repay the borrowed money to the bank – the bank limits the credit risk by means of the so-called credit check . The bank can use the credit check or credit check to calculate the likelihood that borrowers will repay the money on time and as agreed. In addition to confidence factors, the economic and financial circumstances of the consumer are included in the calculation of the creditworthiness of a customer. Positive effects on the applicant’s creditworthiness include a permanent employment contract and a regular and sufficient income. Existing loans and outstanding invoices, on the other hand, have a negative impact on the calculated creditworthiness .
In order to calculate the creditworthiness, the financial institution relies on various sources of information: Some of the information the consumer must send to the bank itself, when applying for a loan : Together with the loan application , the applicant must complete a self-assessment, payroll and a specific Submit number of bank statements. On the basis of these data, the bank determines a household bill for the consumer in which it compares all regular income and expenditure. Another source of information for calculating the creditworthiness of the potential borrower are credit reporting agencies. The protective association for general credit protection , short provides the banks , among others, information on existing liabilities of the consumer and past payment behavior. If the interested party in the past, for example, did not settle invoices and receivables on time, the bank learns about entries in the file. Based on all these data, the credit bureau creates the so-called score – this value expresses the percentage probability that consumers will pay back the loan as agreed to the bank.
Should the consumer have a bad credit rating, the likelihood is high that the bank will reject the loan application or impose a risk premium in addition to the loan interest due. Therefore, a borrower with bad credit usually pays significantly higher interest rates than a customer with a good credit rating. If the bank rejects the loan application completely, it often helps to include a second borrower with a fixed income and a permanent job in the application . The salary of the second borrower improves the overall creditworthiness, which increases the likelihood that the bank will subsequently approve the loan application.