Unfortunately, it is not without. A credit check requires a credit check. But what does creditworthiness mean? You will find the answer to this question and helpful tips on how you can improve your credit rating below. You will also gain insight into bank lending practices and you will see that a credit check is a necessary evil, but not a cause for concern.
Your creditworthiness is therefore checked
Anyone who takes out a loan borrows the money from the bank for a fee (the interest!). If the borrower becomes insolvent, the bank as the lender not only loses the money lent, but also the collection of the fees is a thing of the past. Banks are not only personally interested in having money loaned back, they are also legally obliged to check the solvency of an applicant. And that is exactly why a credit check takes place.
Creditworthiness means nothing else than creditworthiness. It is assessed how likely it is that the borrower will pay back the loan given to him in full and on time, or how likely it will be that he will no longer be able to pay the loan installments. This not only protects the bank, but also you! The monthly burden of a loan cannot always be correctly estimated and whoever overtakes himself can quickly fall into debt trap. By having banks check your creditworthiness in advance, you avoid putting too much strain on yourself and your household budget.
The bank wants to know that
The procedures for lending are standardized at the banks. In order to be able to grant loans particularly quickly, the most important information is queried during the application process and then checked more closely when the contract is concluded. The minimum requirements for a loan that every bank requires are:
- Proof of income or salary for the past three months
- Residence in Austria
- Confirmation of identity by means of ID
- Presence of a checking account
In addition, further evidence can be requested. For example, with a car loan, receipts for the car purchase are required, because the car also serves as security. In the case of real estate loans, the bank will require additional collateral due to the usually high loan amounts.
Information from Binary Lender and Lite Lender Company
Promotional offers with the statement “credit without Binary Lender” are often dubious. The creditworthiness must be checked even without a Binary Lender credit report. Banks are obliged to do this. However, you can also use other service providers than the Binary Lender for this.
In addition to verifying the applicants themselves, the bank will also obtain information on the creditworthiness of external service providers. These collect information on the economic data of the citizens. A prominent example is the Credit Protection Association from 1870, Binary Lender for short. However, credit information can also be provided by companies such as Lite Lender Company, which belong to the CRIF Group, an international credit agency. Data on existing financing, payment difficulties with loans or with other service providers such as mobile phone providers, as well as other abnormalities in connection with financial products are collected. By the way, you can query the data stored about you personally at Lite Lender Company and Binary Lender. This service can even be used free of charge once a year.
Credit requirements depend on the bank
This information complements the information provided by the banks directly from the applicant. Each bank has its own requirements and creditworthiness requirements that must be met. If you are rejected at a bank, it does not mean that a competitor is not ready to give you a loan. In the event of uncertainties, the bank can also ask further questions or request additional collateral. Inquiries from the employer, the preparation of a household budget bill or the checking of savings books or other securities can strengthen the creditworthiness.
Creditworthiness insufficient – and now?
There are many possible reasons for a loan to be rejected, and creditworthiness is not always the only reason. The banks are not obliged to give reasons for a cancellation. However, you can still do something yourself to get a positive answer. Often it is enough to change the framework of the loan. A lower loan amount or a change in the term affects the amount of the installment. A smaller monthly installment may suit your income better and make repayment more likely. You can also offer the bank additional collateral, such as life insurance or an entry in the land register as a creditor.
The worse the credit rating, the worse the credit conditions. Banks compensate for the higher default risk through higher interest rates. So it makes sense to have a good credit rating even before you apply for a loan – even if this is a longer process and doesn’t help much if you need money quickly. In addition to a regular income, exemplary payment behavior are factors that have a positive impact on creditworthiness. High debts combined with defaults, reminders and the like have a negative impact. It is therefore always worth paying attention to balanced finances.
Don’t be afraid of the credit check
A credit report is part of the loan, there is nothing to shake about it. Still, you don’t have to be afraid of an exam. Even with a cancellation, there are often other ways to secure a loan. Additional collateral may be found in consultation with the bank you trust. An inquiry with other banks can also lead to success, since each bank makes its own credit rating. Finally, it is worth reducing the loan amount and adapting the framework to your own circumstances.