Applying for a loan to carry out an exact risk assessment
When applying for a loan, it is perfectly normal for the credit institution from which you are applying for a loan to carry out an exact risk assessment. For this purpose, all personal data of the client are recorded precisely and entered into a specially designed computer program. The computer now takes the client’s personal data and, in most cases, Credit bureau information, and aligns it to a specified scale. The computer awards points for each criterion, which ultimately leads to a certain total number of points, the so-called “scoring value”. It is this scoring value that now has a decisive influence on the amount of the loan interest to be paid. Why is that? Well, so that we can understand the logic behind this allocation of interest based on the scoring value, we first have to clarify which aspects are taken into account in the scoring.
First of all, scoring assesses the age of a person and the likelihood that they will fall ill or even die during the credit period. Next, the program looks at the income of the person concerned and clarifies whether this income was generated from a self-employed activity or from a salaried activity. For most banks, the self-employed or freelancers are a very difficult group of customers and it is not uncommon for them to be rejected just because someone is not employed or, better still, is an official. The next criteria on which the scoring program is based may be other loans from the client and the question of how his total monthly budget is made up (children ?, maintenance payments?, Living expenses?, House deduction?, Tax bracket?).
Loan offers with which banks always advertise
A certain number of points is awarded for all aspects and results of the scoring. This number of points is supplemented by the “Credit bureau value”, also a number of points, which arises solely from the consideration of the Credit bureau information. Each credit institution applies different criteria to such scoring, but in principle the points mentioned are all very important and generally form the basis of such scoring. Depending on the bank’s approach, the weighting of the individual points may vary, or points may not be considered at all and others may be taken into account. From the total number that the scoring result spits out, it is now read whether a client can even be granted a loan and, if so, on what terms this can be done.
The loan offers with which banks always advertise (for example: “Loans with us from 3.9% eff.” Or “Installment loans from 4.5% eff.”) Are always based on the highest scoring values. So it is undoubtedly true that there are these loan offers, but the word “vote” is crucial. If you do not meet the best scoring value, you have no chance of getting the best interest, but you get a worse interest. Most of the time, the difference between these “lock rates” and what you really get in the end is much bigger than you think.