If you want to apply for a loan, you will not pass a credit check. The contracting party, ie a bank or a private investor, is obliged in many cases by the legislator to examine and assess the creditworthiness before granting a loan.
When a lender speaks about creditworthiness, it means that the ability and willingness of the borrower to meet the payment obligations completely and on time . So it’s nothing but risk management on the part of the bank. So, a bank or a private investor wants to be sure that, as the future borrower, you will be able to meet the contractually agreed obligations in the future.
Now we come to the actual credit check and credit check. The information required by the borrower is that he proves his creditworthiness. Proof of creditworthiness would be, for example, their current payroll, as required.
The requirements can be quite different, of course, depends on the bank, type of loan and amount. The demands of the bank for a € 50,000 loan will be significantly higher than for a small loan.
Proof of credit before borrowing
The credit check usually consists of various documents and information. Most banks require their customers to have their last three salary statements in order to determine their income level. The amount of income is very important in this case, this forms the basis for calculating the maximum loan amount.
In the case of large loans, the banks also require an insight into the financial circumstances of the debtor, so the applicant is thoroughly screened here.
Another proof of creditworthiness is information. An information about the debtor at one of the many different credit reporting agencies, such as the credit bureau information. The bank informs itself here about the payment behavior of the borrower. All data that the credit bureau has saved over the borrower / debtor over the years (credit bureau entry), are summarized in the so-called credit bureau score. Scoring uses the information and experience gathered by credit bureau to forecast whether and how high the likelihood that the customer will actually repay the borrowed money.
Information about their creditworthiness requires their approval. Before a bank or other lender can obtain information, you must sign the agreement and, for example, the credit bureau clause.
The credit bureau gives the bank only a risk assessment. Ultimately, the decision to grant a loan lies solely with the bank or another lender who also bears the risk.
Our credit rating is also the calculation basis for the conditions offered by the bank. The lower the risk for the bank the lower the interest for the client.
As a consumer, you can also request a credit report yourself.
The legislator has made provision in this case and the credit bureaus obliged that you give the consumer once a year, a free insight into the data collected by them. It is even recommended that you obtain a self-assessment once a year, at least from the major credit bureaus.