Credit check – what does it mean?@Model.TitleTagString>
Do you know your personal credit rating?
You can now request free credit information online from CRIF AG at comparis.ch.
When lenders receive a loan application, they always run a credit check on the applicant. They do this to make sure that the person wishing to take out a loan is also in a position to repay it. The purpose of the credit check is to prevent the borrower from becoming too heavily indebted.
A person's credit standing serves as an indication of how likely they are to meet their financial obligations. Both ability and willingness to pay are taken into account. In other words, lenders check both the credit capacity and the creditworthiness of the customer.
Credit capacity – is the customer able to pay?
Credit capacity refers to the ability of a customer to pay back a loan. To determine this, lenders examine the customer's budget carefully. Do they earn enough to afford the loan amount they would like?
As part of this analysis, lenders also work out the maximum possible loan amount that the customer can afford. They must also observe the minimum requirements for a loan to be approved, which are set by law. The borrower must be of age and capable of paying back the loan including interest within 36 months.Calculate credit limit
Creditworthiness – will the customer pay?
Creditworthiness indicates how likely it is that the customer will pay back their loan. To determine this, lenders consider the customer's entire financial situation using statistically relevant risk factors such as age, nationality, residence status, place of residence and the frequency with which they change place of residence or work.
In addition, lenders gather information from credit databases, the Centre for Credit Information (ZEK), debt collection offices and residents' registration offices.
Are you interested in finding out your personal credit score?
Data on economic activity, creditworthiness and ability to pay is collected in credit databases. These databases can then function as a source of information about the payment practices of companies and private individuals.
Do you know how good your creditworthiness is according to credit databases? Request your credit score from Comparis (in conjunction with CRIF AG) now or submit a personal information enquiry (self-assessment) using our template.
Find out your personal credit rating now
An insufficient credit score means no loan
A credit check is always performed before a loan is approved. Those with an insufficient score will have their application rejected. What’s more, the rejection is registered by the Centre for Credit Information (ZEK) where it can be viewed by all associated lenders for two years. This makes it even more difficult for the borrower to obtain another loan. It is therefore advisable to avoid having a loan application rejected.
The problem is that lenders do not generally provide information on their risk policy. If a customer is rejected, they are not usually given an explanation.
However, experience shows that, as a rule, the more stable a customer’s circumstances, the better their credit standing.
Interest rate depends on credit standing
Note: Not every lender applies the same strict rules when assessing a loan application. You can generally expect that riskier client profiles (from the lender's point of view), will mean higher interest rates. The lower the lender rates the client's risk, the lower the interest rate will be.
Our tip: It is possible to refinance a loan at any time. This means that you can switch your existing loan to one with a lower interest rate free of charge whenever you like.
It’s really very straightforward and can save you a lot of money. Borrowers who initially have to pay high interest rates because of their risk level should, after six to twelve months, consider refinancing their loan with a bank that offers more favourable conditions.
But beware: applying for a loan with several lenders simultaneously does not create a good impression either. All requests will be registered by the ZEK. Besides, this could lead to a domino effect – if one bank rejects a client, the others will reject them too.