In short, a credit rating is an assessment of your financial situation, ie. An assessment of your income, debt, property, insurance status, housing conditions and a wide range of other conditions.
When you apply for a loan, the bank or finance company you are applying for, makes a credit rating for you to assess whether they can offer you a loan and what interest rate they may have. can offer you.
Why does the bank make a credit rating?
The bank assesses the applicant’s credit status to assess the risk of borrowing money to the applicant. If the applicant has a low income, a high consumption and many existing loans, the bank will assess that there is a high risk that it will not get the money again.
In order to minimize any loss, it will therefore offer a loan with a slightly higher interest rate and set-up fee.
If, on the other hand, you have a healthy economy with air to take out a loan, the bank will happily borrow money – and then it will turn down the interest rate to attract you as a customer.
What is the bank looking at?
“ The best advice is therefore to give your finances a look before you borrow money, strengthen the parameters you can and otherwise be thorough and honest in your application
The bank looks broadly at your finances when deciding on your loan application. They look at many parameters, and the credit rating is always an overall assessment. One cannot therefore decide in advance whether an applicant will be offered a loan.
Overall, the bank looks at your income, your overheads, your civil status, whether you are registered in the RKI, whether you have a co-applicant, whether you have real estate, if you have other debts, whether you are insured, and whether you have a residence permit in Denmark.
Why is credit rating a good idea?
It is a really good idea to wait for a thorough credit rating – even if it takes a day extra compared to the fastest loan providers in the market. The credit rating allows the bank to lower interest and fees because they get a greater assurance that the borrower can repay the money.
At the same time, you avoid accepting a loan that you cannot really afford. The credit rating must thus help to prevent you from establishing bottomless debt or accepting for expensive loans.
With new technologies and digital application forms, a credit rating can go very fast and you are therefore not limited to applying with your own bank, which already knows you as a customer.
By spending some time filling out the application form and allowing the bank a thorough credit rating for you as a customer, you can save a lot of money on interest and fees when you borrow money.
How do I strengthen my credit rating?
First of all, it is absolutely crucial to be honest in his application. Before the bank pays out the loan, they check the applicant’s information with SKAT and withdraw the loan offer if there are discrepancies in relation to the information the applicant has provided. Applicants who cheat in their application are rejected on the back edge, and there is a great risk that they cannot search again afterwards.
That said, there are several things you can do to get a good credit rating and thus a cheaper loan. We give our four best advice here to improve your credit status before applying for a loan.
- # 1 Search with someone else
- # 2 Get rid of RKI
- # 3 Turn down your overheads
- # 4 Join an A-box
Search with someone else
First, it is really good to apply with a co-applicant. It can be your boyfriend, spouse, sister or a good friend. When the bank can see that you are several who are liable for the loan, it has greater security to get the money back.
If one of you is having trouble with repaying the loan, the other can still pay off – and that lowers the bank’s risk. Thus, the bank is often willing to offer lower interest rates.