Before a lender grants you a loan, it is only natural that they want to assess whether you are actually able to pay your monthly repayments. This applies not only to the actual loan amount, but also to the interest and fees you are charged as compensation for the credit granted.
To ensure this, they do a so-called credit rating on you. In this regard, they go through many different aspects. Among other things, they review the following when they credit you as a customer:
- job situation
- family Situation
Such a credit rating is intended to create a picture of your financial situation. Before you can be granted a loan, you must have a positive credit rating. If you want to take out a loan, it is a good idea to work on improving your credit rating.
How to improve your credit rating
Your credit rating plays a crucial role in borrowing money. To increase your chances, you should make an effort to improve your credit rating, if it is not already sublime. Fortunately, this is something you can achieve in several ways.
Here are some tips on what you can do yourself if you want to improve your credit rating – and thus increase your chances of getting the loan you want.
Pay your bills on time
If you are not good at paying your bills on time, then you could risk having a negative impact on your credit rating. This is an indicator that there are no best conditions for you to pay off your loan repayments in a timely manner.
Therefore, it is important that you always focus on paying your bills on time. If this does not happen, you will not only receive reminders but may even risk registering in RKI – and it is not exactly something that will benefit your credit rating in a positive direction.
Repay existing debt
When a lender assesses your creditworthiness, it looks at, among other things, whether you have an existing debt. If so, they will also investigate the size of your existing debt.
If you have previously taken out loans that have not yet been repaid, this will typically be considered as a sign that your repayment ability is not particularly positive. If you want to take out a new loan, it is a good idea to make sure that you pay off your existing debt.
Apply with a partner
You will not be credited with this, but your chances of being approved by the chosen lender will increase if you have a co-applicant when you submit your application. With a co-applicant, you will not guarantee the loan on your own, which increases your chances of getting approved.
However, if this is something you are considering, it is important that your co-applicant understands that he or she will be responsible for repaying your loan should you be unable to repay the loan yourself.