Credit Information – Rules and Rights

In order to better guarantee consumers’ privacy, new credit rating guidelines have been in place since the beginning of April 2010. Credit bureaus such as the Credit bureau, are required if you want to apply for a loan, have a business partner who wants to hedge with an information or if you change the landlord. The credit rating of a person depends on his score.

Credit information compared

Credit information compared

The score and insight into your own credit rating

The score and insight into your own credit rating

Unpaid invoices, late payments on loans, but even multiple loan requests from different banks to compare offers may negatively impact a person’s score.

The exchange of credit information is behind the back of the consumer and is hard to understand for him. Self-information to get an idea of ​​how credit agencies assess their own credit rating, and especially who queries them for what purpose, were so far possible, but cost.

The new privacy policy gives the consumer the right to ask for free written information once a year, verifying what data is stored, what its meaning is, and who asked it for what purpose.

Credit bureaus are recommend to formulate the request for information very precisely. In the meantime sample forms are available for this. In general, however, it is already enshrined in law that the above information must of course be given in such a way that the consumer understands it.

In addition, a corresponding information about the past 12 months can be required. Any further information within a year, however, will continue to cost fees, which in most cases are based on the old prices.

Special Credit bureau information in business dealings

Special Credit bureau information in business dealings

There is a difference, however, with credit reports for customers, if their business partner or landlord wants to hedge. The information is specially printed on counterfeit-proof paper and costs at the Credit bureau 18.50 USD. They contain only positive information. Information about the current account or the existence of a credit card is not part of the content.

The rules for the scoring process itself have at least become a bit fairer. In the past, it was still possible for mail order companies to disadvantage a customer simply because of their poor residential location. Scoring procedures based solely on the address are no longer allowed under the new law.

If companies or mail order companies themselves want to make messages to customers, then only limited. If the customer still has outstanding invoices, the notification is only admissible if the customer has been reminded in writing at least twice, he does not contest the claim, at least four weeks have elapsed after the first reminder and the debtor has been informed of the forthcoming notification. On the other hand, anyone who receives claims that he considers unlawful should immediately file an objection.

Payday loans with non-credit-standing interest

The interest rate

The interest rate

A loan with credit-independent interest is not the same as a loan without credit bureau. Independent of credit means that the lending rate is decided independently of the creditworthiness of the borrower. The interest rate is therefore the same for all borrowers, with good or weak credit ratings, and is therefore also called fixed interest. An adequate credit rating is nonetheless fundamental to obtaining a loan.

  • Credit-independent interest rates are the same for all borrowers (hence also called fixed interest rates)
  • Loans with a credit rating-independent interest rate still require sufficient creditworthiness
  • Credit-independent interest rates partly cheaper than credit-based interest rates
  • By contrast, loans without credit bureau usually have higher interest rates

Credit-dependent vs. credit-independent interest

Credit-dependent vs. credit-independent interest

In the case of payday loans from the various banks, there are usually two different types of interest – credit-dependent and non-interest-bearing. More often there is a credit-related interest rate, which is specified in a bandwidth with upper and lower limits. The alternative to this is the credit-independent interest rate, also known as fixed rate.

Credit-dependent interest

Loans with a credit-based interest rate are also eligible for borrowers with lower credit ratings. The sentence “Interest rates include risk” means that the borrower has to pay the higher the interest rate, the higher the credit default risk for the bank. Some institutions also take into account the term of the loan and the amount of the loan in the case of interest-rate-dependent interest. A longer maturity, for example, means a higher risk of default for the bank and is therefore provided with a higher interest rate.

Credit-independent interest

If a bank offers a fixed interest rate, this means a single interest rate for all borrowers, regardless of maturity, loan amount and credit rating. While the credit-based interest rate allows a mixed calculation across all credit ratings, the credit institution has to filter out the borrowers more with a single interest rate. Customers with insufficient creditworthiness will probably not have a chance here. You would have to apply for a loan without credit bureau.

If you compare the fixed interest rate of a bank with a credit-based interest rate, you get an interesting picture. In September 2018, for example, KDP’s fixed interest rate was effectively 3.49 percent annually. The two-thirds interest of Risonbank, on the other hand, was effectively 4.90 percent effective in the year. The two-thirds rate indicates which maximum interest rate at least two-thirds of the borrowers have to pay. The examples show that KDP is cheaper with the fixed interest rate than, for example, Risonbank uses the credit-based interest rate for the majority of its clients.

Fixed rate with two meanings

Fixed rate with two meanings

Credit institutions use the term “fixed interest rate” for payday loans as a synonym for interest-free, maturity-independent and sum-independent interest rates. In business, however, fixed interest means that the interest rate is fixed for the entire term. The counterpart to this is the variable interest, which is adjusted at certain intervals during the loan period in accordance with the development of a reference interest rate.

For whom is the non-cash interest rate worthwhile?

For whom is the non-cash interest rate worthwhile?

In the first place, the fixed interest rate is often worthwhile for people with medium to poor credit ratings. However, borrowers should not be deterred if they feel they are not meeting the criteria. A condition request at a bank costs nothing and does not affect the credit bureau (as long as only a condition request and no request for a quote is made!). Against this background, it is therefore advisable to be present at several banks. Since loan requests are often made online today, the time involved is marginal. However, if you are aware that you have one or the other credit bureau entry or you do not want to have any further information in your credit bureau file, you should focus on banks which grant a loan without credit bureau.

Delete credit bureau entries – that’s how it works!

The credit check is part of the everyday business of the financial world. Anyone who wants to pay on account or take out a loan is usually screened for their liquidity. The credit bureau serves as a large collection center around information about payments made, their punctuality and other relevant details which could influence the financial environment.

A sensible system that can cause difficulties for citizens with high reliability. The stored data is not always correct or it is simply not taken into consideration that the receivables have been repaid. As a result threatens the unjustified gradation of creditworthiness, which is accompanied by numerous restrictions on loan offers and purchases.

An exceptional case that affects only a few? According to statistics, nearly every fourth consumer generates faulty data records.

Only a few of these entries are automatically detected and deleted without any direct contact with consumers

Incomplete information about the settlement of crediter or simply wrong entries are not uncommon. A problem case does not have to be based on massive mistakes. An accumulation of smaller cases is already enough to noticeably impair the individual rating of an individual and to achieve effects.

IMPORTANT: Such repercussions also include poorer credit conditions and the resulting increase in lending rates. Any consumer who wants to have a good credit rating, should delete erroneous and outdated credit bureau entries.

Locate errors and correct them quickly

Locate errors and correct them quickly

The causes of inaccurate or incorrect entries are manifold. Frequently, a temporal difference between cancellation of payment obligations is also responsible. For example, overdue loan receivables exceed the repayment date and are not considered completed, as in the case of failed settlement.

In addition, there are sheer mistakes in the amounts, even personal information is not always up to date. Each consumer therefore has the right once a year to request a free information from all institutions for the credit information.

Additional fees are only due from the second request. Therefore, a check on suspicion of a problem is always recommended.

TIP: Deleting a bad negative credit bureau entry takes some time. Therefore, it is advisable at least once a year to use the free self-information and to eliminate problems early.

If important personal information is missing or entries are incorrect, it can be insisted on rectification. According to § 35 Abs. 1 BDSG the legislator obligates all credit bureaus to this step – either by deleting the data sets or a specific correction of individual sections.

Delayed data and slow delivery

Delayed data and slow delivery

The credit bureau is not always the main responsible, if caused by inaccurate data unpleasant problems. Often, the bottleneck is already in the hands of companies that have a contract with the consumer.

According to § 28a Abs. 3 BDSG, it is stipulated by law that, after the expiry of one month at the latest, all changes regarding the payment of interest payments or the termination of a contract must be submitted. In this way a fair and timely consideration of negative as well as positive processes should be guaranteed.

If the specifications do not agree with the actual information regarding the claims, this often helps to get in direct contact with the company involved.

A friendly note with a request for transmission of the current contract status to the various credit rating agencies usually already promises success. However, owning the correction is still the safest method.

If a company confirms the fulfillment of all contractual conditions, the direct dispatch to the credit bureau can achieve a quick success.

If no further problems occur, the negative note should disappear in the future in the information or be regarded as done.

In the case of a loan, such a degree does not apply. According to credit bureau, the note is unnecessary in this respect and already results from the information about the contract. Of course, wrong or misleading details can creep in here as well.

More about your credit rights in our guide:

What rights do consumers have for loans?

Here, the same advice as in ordinary sales contracts applies: By agreement between consumers, the company and the credit agency, an agreement should be reached on existing problems.

Features are stored for up to three years

If a late claim is settled, the entry remains valid in this regard and is only assessed as completed. An early elimination by the credit bureau is not by the legislator in accordance with § 35 paragraph 2 sentence 2 No. 4 BDSG being considered. Datasets are thus fully retained for a period of three years. With few exceptions, no objections can be raised.

However: If the debt to be paid does not exceed an amount of 2000 €, you can delete a credit bureau entry.

Condition for this is a repayment of the obligation after six weeks at the latest and only if there is no court order or an enforcement order. If all these factors are given, credit bureau is authorized to remove the relevant data from the register of persons.

Deadlines and unclear demands

Deadlines and unclear demands

If the term of payment expires, the data may not be transmitted immediately to the credit bureau. This step takes place only as a final consequence, previous reminders remain unanswered to the consumer. Up to two times, the creditor must ask his debtor in writing to pay his debt. It sees the Federal Data Protection Act in § 28a BDSG that the time between first reminder and forwarding to credit bureau must be at least four weeks.

At the same time, the debtor must be informed of this intention. The purpose of this provision is that accidental violations of the prescribed limits does not directly lead to a devaluation in the ranking of the credit bureaus. Interpretations on their own behalf on the legal basis are not relevant and in no way binding.

Thus, if there is a dispute over an outstanding payment, a company may not act on its own initiative and pass on data to the credit bureau.

The time of forwarding is also relevant. In addition to the personal objection to the credit agency for unjustified claims and the order of execution is considered a key criterion.

If a company sends the information to the credit bureau before the expiry of the deadlines or the obligatory reminders, this process can be reversed.

A simple note in a letter also clarifies that the claims in the dispute were not accepted by both parties. The entry in question is therefore invalid in this situation. A consumer is right to have such a credit bureau entry to delete from the credit agency.

Consumer Credit Law: Companies threaten to threaten with an entry:

credit bureau – when companies threaten with an entry

Eliminate deadlocked conflicts

Eliminate deadlocked conflicts

If the credit rating does not address the issue or even refuses to remove dubious notices, the involvement of an arbitrator in mediation in disputes will help. The credit bureau even maintains a service for private customers for this occasion.

The so-called ombudsman is considered an impartial mediator, whose invocation is associated with no cost. After clarification of all facts, he promulgated a verdict by an arbitral award. If there are reasonable doubts about the correctness of the deposited information in credit bureau’s data records, these must be eliminated immediately or at least adjusted.

He is authorized to review any disagreements with reminders and contracts with companies. Likewise in the case of complaints, he may request the correction of entries. Although other institutes do not have their own ombudsman like credit bureau, they do have their own data protection officer.

If the personal request also falls on deaf ears, the competent data protection supervisory authority will step in as the next higher instance. Credit bureaus usually list the personnel responsible for such procedures under the Privacy category.

With a bit of patience and a well-written letter, you can delete any erroneous credit bureau entry. Of course, such matters can not be done in one day. Correcting your own data with the credit bureaus is a slow process, but an improved credit rating is worth the effort a hundredfold.

Are lending rates dependent on credit?

If a bank lends, it can make the interest rate dependent or credit rating independent. The latter means that all customers pay the same interest rate. Of course, the borrower must be creditworthy for this in principle.

The credit-independent fixed-rate loan

The credit-independent fixed-rate loan

This form is offered less frequently. It has advantages and disadvantages for borrowers. Certain consumers benefit from this, while others consider the credit-based loan to be more appropriate. Again, to understand: Credit-independent does not mean that the credit rating does not matter. It must be given in principle. If you have a negative credit bureau entry or too low a credit bureau score (below 90 points), you will not receive a loan – not even a “credit-independent” one.

In principle, the Bank sets an average interest rate for such loans that is the same for all groups of borrowers. It is therefore between the cheapest and least favorable credit-based loans. What are the advantages and disadvantages?

Advantages of credit-independent loan:

  • Consumers already see in advertising the valid interest rate. You do not need to start a request to know your individual, credit-based interest rate.
  • Because the prospect does not need to initiate a credit request for comparison purposes, it can not influence his credit bureau score.

Disadvantages of credit independent loan:

  • For people with good credit ratings, the credit rating-independent loan is definitely more expensive.
  • Even for people with a slightly lower credit rating, but in principle creditworthy, he has disadvantages. You may not get this loan because the risk is too high for the bank, but it can not be offset by an individual higher interest rate. Affected are, among others, self-employed.
  • Credit-independent loans are more likely to be given to “secure” fixed-income borrowers. For these they are a bit too expensive.

Credit-based credit

Credit-based credit

In this form, which is offered much more frequently, the bank checks the score of the consumer’s credit request a little more closely and then offers an individual interest rate – depending on the credit rating. That’s basically fair.

Persons with a very good credit rating, such as civil servants, can benefit from an extremely low interest rate, while those with a weaker credit rating, but with a positive credit bureau, can also get the loan. You just have to pay a bit more interest. Accordingly, there are the following advantages and disadvantages with this type of loan:

Advantages credit-based loan:

  • Any borrower with sufficient credit standing can receive this loan.
  • The interest is in principle fair.
  • Particularly persons with best creditworthiness save very clearly with this credit form. Your low default risk is rewarded with very favorable interest rates.
  • At least, people with lower credit ratings will get the chance to get a loan, even if it costs higher interest rates.

Disadvantages credit-dependent loan:

  • Not every borrower opens up the calculation of his score.
  • The interested party knows his individual interest only after his loan request. The bank’s audit includes a credit bureau query that blocks a request from another bank for ten days if the bank does not declare the request – as required – to credit bureau as a pure customer request.

The last point does not matter if the bank acts with due care. This includes expressly declaring in the credit bureau inquiry that the interested party is only interested in his credit terms. In this case, the credit bureau does not make a note which otherwise lowers the score below the required 90 points for ten days. Otherwise, credit bureau will apply this lowering of the scores, so that consumers will not be able to get into trouble with several banks in a short time without restraint.

Is the credit bureau scoring influenced by many loan inquiries?

The Impact of Loan Inquiries on credit bureau Scoring – Not only problematic payment behavior can adversely affect the score value of credit bureau. Also, a higher frequency of loan requests from interested consumers worsens the value. It is better to get relevant information about a condition query. It has no negative impact on the score value.

Definition credit bureau scoring

Definition credit bureau scoring

credit bureau scoring is a complex process in which the individual creditworthiness of a customer is determined.

The credit rating provides information about the creditworthiness and is determined from the data available from the credit bureau (protection association for general credit protection). The economic information agency in the legal form of a public limited company gives authorized parties various information on the business conduct of a person. credit bureau sees itself as a service provider and wants to protect its customers against potential credit risk on the one hand and consumers on the other hand from possible over-indebtedness.

Borrowers must give their consent before the credit bureau grants information to lenders. As a rule, without the information on a sufficient creditworthiness no loan is granted. The required score value is a corresponding assessment based on statistical data. The associated characteristics can be positive and negative in nature and are incorporated into the credit bureau scoring.

Positive and negative credit bureau characteristics

Positive and negative credit bureau characteristics

Both types of characteristics give conclusions about the creditworthiness of a consumer.

Basically, information about most people is stored in the credit bureau. As a whole, nearly 90 percent of all relevant data is positive. For example, they provide information about the reliability of payments, the number of existing credit cards and bank accounts and the associated positive payment behavior.

Only in the case of abnormalities, such as a late payment or a payment default, negative entries occur that adversely affect the scoring value at credit bureau. For example, if there is an enforcement order or a loan has been terminated by the bank, these negative features will appear in the score value.

Low values ​​mean that lenders are more likely to default on payments. The commitment to a desired installment or a loan can be made more difficult. Even with a high level of credit inquiries, the credit bureau Score may deteriorate. If, however, the so-called condition request is made, this has no negative impact on the value.

The loan request

The loan request

It is often thought that the credit request alone could lead to grading.

This is clearly not the case. However, it depends on the way the information is collected. Consumers who submit inquiries to several lenders and who already provide their personal data at the time of the mere expression of interest must reckon on storage at credit bureau. Such information is of interest to a lender because it is reasonable to assume that frequent requests without borrowing will indicate a negative decision.

Whether this is actually the case, a bank does not see, it only sees the repeated requests or the corresponding value in the scoring. Anyone who has already made frequent specific inquiries with banks, stating the personal details, should inquire at the credit bureau itself whether these requests have been saved. Every citizen has the right to have a free access to the data once a year. For this purpose, a form must be filled, which is available for download on the page of the credit agency.

Condition rather than loan request

Condition rather than loan request

Nevertheless, consumers do not have to give up on several comparative credit inquiries.

In order to obtain an offer, it is usually sufficient to enter the relevant information in an anonymous form into a loan calculator and to hear the offer from the lender. This request is a condition request. Its purpose is to give a consumer, without further obligations, an overview of the various options and terms of specific loan options.

The request for a condition is therefore considered to be a trade-neutral expression of interest, which has no influence on the personal credit bureau value in contrast to the actual request for credit. This regulation also applies in the case of a personal meeting with a local bank. However, the customer should point out that initially he is only interested in terms and conditions, not a loan.

The mini loan – a real alternative? | Payday loan

Those who need money at short notice have the option of a mini loan. However, not all financial institutions offer microcredit because of the low loan amount.

Loans between 500 and 5000 euros

Loans between 500 and 5000 euros

A mini loan is a loan that amounts to a maximum of 5000 euros. It serves to bridge short-term liquidity problems and is a cheap solution, especially compared to the credit line. Depending on the provider, the interest rates amount to three to four percent, with processing fees still pending. The terms of such a loan are usually twelve months, but this also depends on the loan amount and the respective conditions. Here, too, there are differences from institute to institute, which must be taken into consideration. Nevertheless, a mini-loan is a good solution for short-term money problems even with negative credit bureau, which can be used especially online.

Mini loan mainly available online

Mini loan mainly available online

Since the processing fees for a mini loan are out of all proportion to the loan amount, by no means all banks offer such a loan. It is therefore advisable to go directly to the Internet and look for the right loan there. Good providers offer corresponding services with interest rates below four percent. In addition, it is easily possible to apply for the contract over the Internet. The provider then sends the corresponding documents, which contain all the necessary information.

Alternatively, the microcredit can also be completed through a financial broker. This makes it possible to also resort to the loan offers from foreign banks and thus possibly obtain more favorable terms. However, it should be noted here that the commissioning of a financial broker incurs corresponding fees.

Hardly any collateral needed

Hardly any collateral needed

A big advantage of the mini-credit are the manageable collateral. As a rule, only the usual salary statement is required, which is supplemented by a corresponding wage attachment clause in the loan agreement. In the event of a default, the bank has the option of seizing part of the borrower’s salary to settle the outstanding debt.

A guarantee can also be used as collateral. However, due to the low loan amount, banks usually try first to collect the outstanding money in the usual way. In any case, certain collateral is required to receive a mini loan. Those who do not have this, can fall back on the classic discretionary credit, but must then expect comparatively high interest rates. In addition, credit facilities are also granted only on a regular cash receipt and only to a certain amount. Who is uncertain: From the bank and in the consultation clarify the possibilities. In case of doubt, the payday loan loan helps with small sums.