What is creditworthiness?
What is creditworthiness?
The word creditworthiness comes from Latin and means “assets” or “excellence”. In the business world, creditworthiness means a person’s creditworthiness: the ability to reliably and reliably settle outstanding bills, installments and other payment obligations. How good your credit rating is depends on your personal circumstances, your income and financial situation. Based on your creditworthiness, banks, companies and landlords can assess the risk of default before signing a contract. More of this story: awebdezine.com
What does “creditworthiness required” mean?
In the general terms and conditions of banks, companies and online shops, the condition “creditworthiness required” often appears. This means that you, as a business partner, must be creditworthy in order to conclude a contract. For example, if you apply for a loan from a bank, you must have sufficient income and a good payment record for the past few years.
Good to know: The condition “creditworthiness provided” often does not apply to the loan in general, but only to particularly low interest rates. If your credit rating is not optimal, you may still be able to get a loan – only on worse terms.
Would you like to take out a loan? Then best compare offers directly in our installment loan comparison.
When will my credit rating be checked?
As soon as you want to enter into a business relationship with a bank or a company, they will check your creditworthiness in advance. The aim of the credit check is that your business partners can better assess whether you will make your payments reliably.
Banks check your credit rating before lending. Certain insurance companies also check the creditworthiness of their customers. The situation is similar if you make an installment purchase, rent an apartment, change your electricity provider or want to lease a car. We explain what affects your credit rating and what the credit rating score means on our Credit Bureau Score page.
What are the consequences of a high / low credit rating?
If you have a high credit rating, you have a better chance of concluding a contract – and also of good contract conditions, such as a low interest rate. On the other hand, if you have a bad credit rating, which is also known as negative credit rating, you are associated with an increased risk of default. As a result, a contract with you either does not come about – or on terms that are much worse than for people with a good credit rating. The standards that are used for a credit check can differ greatly depending on the company and industry.
Who calculates the credit rating?
In order to be able to calculate your creditworthiness, companies and banks obtain information from credit agencies such as Credit Bureau: It collects and stores your personal data, data on your payment history, as well as court and collection data. The credit agency can use this data to calculate your creditworthiness. The algorithm behind this calculation is top secret. However, this results in a value that is also called a creditworthiness score and that is visible to the companies. It provides information about how likely you are to default.
What is a good credit rating?
A good credit rating means that you have reliable solvency. Entries via a current account, mobile phone contracts with term, leasing contracts, loans or mail order accounts are – to a normal extent – generally considered positive for your creditworthiness. They point out that banks and companies trust you and think you are creditworthy.
Credit agencies create ratings to assess your creditworthiness. And what is a positive credit score? A very good credit rating begins at Credit Bureau with a Credit Bureau score of 97%. From a Credit Bureau credit rating of 95%, one speaks of a good value. Nobody can achieve a full 100% because there is always a residual risk of dying.
How can I improve my credit rating?
Fortunately, you have control over your creditworthiness. With our tips you can improve and optimize your credit rating:
- Do not purchase more than two credit cards. Otherwise you might get the impression that you have financial problems.
- Stay loyal to a bank and limit yourself to one business and one personal account.
- Don’t let contracts continue even though you no longer need them.
- Always pay your bills immediately and don’t have to send reminders first.
- It is better to arrange a somewhat more generous overdraft facility than to have to use a small one to the full every month or to overuse it.
- Announce creditors in good time if payment of an open invoice or installment is delayed.
You can find more tips on our advice page on improving the Credit Bureau score.
Where can I see my credit rating?
The easiest way to check your creditworthiness is to request a free data overview from Credit Bureau. You will receive the document within a few days. On the basis of your Credit Bureau score, you can see: What is my credit rating? How creditworthy am I?
Where and how you can request your Credit Bureau information in order to check your own creditworthiness, we explain in our article Credit Bureau self-assessment. You can find out how this works for the other credit bureaus on the credit bureaus page.