Bad credit comes with many problems. You can find out how to improve your creditworthiness in just a few steps here at GIGA.
If you can’t pay bills, your credit rating will suffer. You are then no longer considered creditworthy and merchants may refuse to sign up for subscriptions or installment purchase contracts. Finding an apartment is also becoming more difficult. You can improve your credit rating – we’ll show you how.
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This is how your credit rating is measured
In Germany, the Schufa Holding AG Data to assess the creditworthiness of private individuals. She has developed formulas for calculating the creditworthiness (the so-called Schufa score). There is a base score, which is recalculated every three months, and an industry score, which is based on data updated daily. You need a Schufa report if you want to sign a rental contract, for example, because your landlords want to make sure that you can pay the rent in the long term. Companies can also query the Schufa score for other temporary contracts, for example when concluding mobile phone contracts or subscriptions. You cannot avoid a rating by the Schufa, but you have opportunities to improve your credit rating.
First step: Obtain Schufa information
Thanks to data protection regulations, Schufa Holding AG must provide you with information about the data it has stored about you once a year free of charge. You have to fill out a form that Schufa has hidden well on its website. It is important that you have a data copy applied for and not the chargeable credit report. The data copy contains very sensitive information and is Not intended to be passed on to third parties (e.g. landlords).
Second step: Have false Schufa entries deleted
Schufa entries in the industry score are deleted when contracts expire or are terminated by you (provided that no debts are outstanding). Credit and late payment information may be retained for up to four years. But: Schufa must delete incorrect entries immediately. If you have settled your debts and are no longer in arrears, you should request the Schufa to delete the corresponding entries. This way you will be seen as creditworthy again more quickly.
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Third step: repay loans
This step may come before the second if you can still pay off smaller loans in the short and medium term. The Schufa evaluates a timely and full repayment Loans are always good – they prove that you are meeting your financial obligations, and this increases your chances of getting loans and advances in the future.
Fourth step: Get rid of ballast
How many credit cards and bank accounts do you have? How many contracts continue even though you no longer need them? You should reduce their number to improve your Schufa score. Your piggy bank will be happy too. Do not take out further loans if you cannot be sure of repaying them in full on time.
Fifth step: Communicate openly and stay liquid
If you do find yourself short of cash, let your creditors know. They may grant you a deferral of payment or repayment in installments without informing the Schufa. Create a financial cushion that you can use to meet your financial obligations even when the going gets tough. Calculate how much money you spend each month and add extraordinary costs if, for example, your car or the washing machine needs repairs.
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