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How you can effectively improve your credit rating.

Improve creditworthiness

How you can effectively improve your credit rating.

A good credit rating can be beneficial in many areas of life. For example, consumers with a good credit rating have better chances of getting a bank loan, have to pay less interest, and are more likely to be awarded a new apartment or to be offered hire purchase from a retailer. But many people don't even know how creditworthy they actually are. If a loan application is then submitted, the unpleasant surprise comes: the loan application is rejected. It doesn't have to be! German consumers definitely have an influence on their credit rating. If you are planning to take a loan in the near future, you should definitely consider a few points beforehand.

Most banks use the Schufa data, among other things, for the credit check of the applicant. This information provides the bank with important information about other loan liabilities, current contracts or payment history. All of this data is incorporated into the assessment of creditworthiness and can also be used to create offers that are individually tailored to the applicant's situation. For example, if a potential borrower already has several current loans and applies for a further installment loan , the bank can offer him a debt rescheduling with an increase in the loan amount instead of an additional loan. This can reduce the monthly rate by up to 50% and thus significantly improve the creditworthiness.

But what if the data in the Schufa is no longer up-to-date or even contains incorrect information. It has already happened that the conclusion of contracts was recorded correctly in the Schufa file, but no corresponding update was carried out after their termination, which meant that long-completed contracts or liabilities in the Schufa still played a role in fact and thus worsened the Schufascore. It is therefore advisable to check the data stored by Schufa to ensure that it is up-to-date and correct before taking out a loan. Once a year, consumers can obtain a self-assessment from Schufa free of charge. If it then actually turns out that not all of the information is correct, Schufa must update the relevant data upon request - i.e. change or delete.

If you have accumulated several credit cards over time or opened different accounts, you should check whether you need them at all before you apply for a loan. Because even a high number of credit cards and accounts can be interpreted as a possible signal of low creditworthiness. The frequent change of provider is also not welcomed by banks. On the other hand, banks rate it very positively when customers stay with a business partner for the long term and reliably meet their payment obligations over a long period of time.

More and more dealers advertise with zero percent financing. Even if the offers sound tempting - do not take up every hire purchase offer from retailers immediately just because it is a supposedly cheap offer! If your budget allows it, there is no need to conclude financing unnecessarily - especially since high discounts can often be negotiated with immediate cash payments. If you cannot really afford the total amount, check before buying whether you would be better off with a low-interest installment loan. We have already discussed in the article " Be careful with zero percent financing " that there are often only simple marketing campaigns behind zero percent financing. In contrast to rigid dealer financing, installment loans offer significantly more flexibility in repayment. Anyone who has already made use of several dealer financings will also quickly lose track of things. Every hire purchase is recorded separately in your Schufa. A rescheduling loan , on the other hand, brings order and control back to the monthly debts and, as described above, helps improve creditworthiness.

When researching the cheapest installment loan offer, it is generally advisable to obtain several offers in writing in order to be able to compare the interest rates and loan costs of different providers in black and white. However, when obtaining the offers, make sure that the Schufa inquiry is made under "Inquiry for credit conditions". Otherwise, soliciting multiple loan offers could be misinterpreted to mean that you are in dire need of money and have difficulty finding a lender. Too many credit inquiries (from three to five inquiries within a very short time) can have a negative impact on your Schufascore. In contrast to the "Inquiry for credit application", the "Inquiry for credit conditions" is Schufan-neutral, ie your inquiry is not entered in Schufa and therefore has no influence on your Schufascore.

The decision whether to enter a second applicant in the loan application also has an impact on your creditworthiness. For example, if you live in a permanent partnership and your partner has his own regular income, the bank will also take into account both salaries when determining the creditworthiness in the case of two applicants. The resulting reduced risk for the bank is reflected in a significantly lower interest rate on your loan.

My name is Quang Lam and I work at Hegner Möller GmbH as Marketing Director. I am very interested in finance and sports. In my free time I like to go running and I also run a running blog. For the Best Credit blog I only write about topics that really interest me.