How to improve your credit rating and get financing


When you buy a property, you enter into many commitments.

As a rule, you are making the biggest investment of your life.

Therefore, this step should always be well considered. With a good credit rating, you can obtain low-interest real estate financing.

But which factors are included in the credit rating and how can it be improved?? After all, many consumers still believe that only poor payment behavior would have a negative impact on their credit rating.

In the following, I will explain which additional factors play a role and how you can improve your credit rating. In addition, I explain what you need to consider when buying a house and which points should already be determined in advance.

Check your own financial situation


Check your financial situation

Buying real estate is always worthwhile if you are looking for a stable investment that can later be passed on to your children.

However, owning your own property is also ideal as a retirement provision – but only if it is paid off by the time you reach retirement age and then only the operating costs are incurred.

For the purchase should be an equity share of at least 20 percent of the purchase price available. The current low interest rate environment also makes real estate purchases very attractive.

The first step is to prepare a budget statement with all monthly income and expenses. In contrast, it must not only be possible to pay the installments, but there should also be a financial buffer for emergencies.

In general, the more equity you have, the more favorable the interest rate will be.

Borrowers should always go into the loan discussion well prepared. Unlike prepaid credit cards, where creditworthiness is irrelevant, your credit rating is extremely important for real estate financing.

It is best to first obtain several financing offers from different credit institutions. So that the request does not fall through because of a bad credit score, consumers should make use of their annual right to a free self-disclosure and check the information recorded there for accuracy.

Improve your credit score – this is how it works

credit score

If you want to improve your credit rating in the short term before taking out real estate financing, you should first obtain a self-disclosure.

The check of one's own creditworthiness is available free of charge, for example, here. Check the accuracy of the data included. Because errors can always occur in the storage, which then worsen your credit rating. All data stored at the credit agencies are the basis for the credit assessment.

No bank in germany grants real estate financing without first checking the creditworthiness of the borrower – this is done by making an inquiry with an appropriate credit agency.

Not only the decision to approve or reject the real estate financing depends on the credit score, but also on the interest rate.

1. Correction of stored data

Errors can always happen, and even credit agencies do not work completely error-free.

It is possible that the credit report has stored inaccurate or outdated data and, for example, a loan that has long since been repaid is not yet deleted.

A reminder against which you have appealed and which is unjustified, can still be included and the credit rating significantly worsened.

In such cases, request the credit agency to delete the incorrect data.

2. Making the right loan application

If you get comparison offers from different banks before taking up real estate financing, you must make sure that the credit institution makes the credit inquiry as an "inquiry credit conditions".

Because lenders and banks report all credit inquiries to the credit bureaus – even if they are made without obligation.

Therefore, when you make the request, you should point out to the bank that you are only interested in the credit conditions.

3. Think of all incomes

Applying for a loan is another great way for you to improve your credit score.

Because the banks do not judge only on the basis of the credit report, but have also own criteria. This includes, among other things, existing income and assets as well as payment obligations.

Therefore, when declaring your income, remember to include all income, such as interest income from investments, income tax refunds or any care allowance received. Adding a second borrower with their own income also significantly improves their credit score.

4. Long-term measures to improve credit ratings

Very many quality criteria can not be influenced in the short term before taking out a real estate loan.

Therefore it is appropriate to improve your credit rating already in the long run.

Deterioration occurs due to many small loans, multiple checking accounts and credit cards, and of course, unpaid bills. On the other hand a long-term employment relationship has a positive effect.

Avoid arrears and pay your bills on time. Because your primary bank knows all of your account activity, it can better assess your overall payment history than an outside provider can.

Therefore, the likelihood is quite high that a third-party lending institution will rate your credit score higher, despite your credit report being the same.

Buying real estate – this is important!

If your credit has worked out, you can go ahead with the purchase without a care in the world. There are a few things to keep in mind here as well:

Determine the region

Which region should it be? If a change of location is possibly pending professionally?

Then a property can be a hindrance and you may have to sell it – if you have to do it quickly – at a great loss of value!

The location of the property is unchangeable, but the environment can change. Therefore, a trip to the building office is in order to get an insight into the building plans of the neighborhood.

The house search

There are some internet portals for real estate that offer a wide range of services.

You should also inform your circle of acquaintances that you are planning to buy a property. Maybe one or two of your friends have a tip or know someone who happens to be selling a suitable property.