Creditworthiness stands for creditworthiness – and thus for your ability to repay a loan in accordance with the contract. A lender uses a credit check to determine whether you and your company are financially sound in order to meet a payment obligation as agreed. If the credit check is good, it will lend you money. If your creditworthiness is rather weak, problems can arise.
In a narrower sense, you must have good credit if you want to take out a loan. The financing bank has a number of ways to check your creditworthiness. For small companies in particular, a credit check of your company is important, but also your personal creditworthiness. So if you want to take out a loan, it is probably understandable if a bank wants to know whether you can reliably repay the borrowed money over a longer period of time. If there is a risk that the installments will not be paid soon, the risk of default on the bank increases enormously. As a rule, she does not take this risk. For you, this means that your loan application will be rejected. This means that a planned purchase is not possible, an investment has to be postponed, the expansion of your business has to be financed in another way. The importance of your creditworthiness should therefore not be underestimated. But it doesn’t only matter if you want to take out a loan.
When clients do a credit check
You have probably been in contact with many of your customers for a long time. As a craftsman with many years of experience, you have built up a good reputation. You are recommended, you live from your references. Nevertheless, it can easily happen that a new customer does not want to rely on the good results of your work. He wants to know more about your credit rating. Maybe he is planning a long-term order, maybe it is also about a high order volume. He may want to know whether you can accompany a job with a high financial value over a longer period of time. For this he needs proof based on a credit check. This may seem unusual at first, because there is no apparent reason for an assessment of the creditworthiness of established tradesmen in particular.
Nevertheless, you have to expect that a new customer or a long-term client will ask about your credit rating. He probably won’t do that directly to you. Rather, it will request information about you. Like a bank, a client has several options to inquire about your business. Since he can use his information sources at any time without informing you about it, you should make sure that the result of a credit check is in order at all times and that your data is recorded correctly. But what options do you have for this?
credit bureau as an important source of information for private credit checks
One of the most common ways to get information about your personal creditworthiness is the credit bureau, which contains all information about you that is in some way relevant to credit agreements, leasing transactions or other contracts that could lead to liabilities in any way. When you apply for a loan, you usually have to provide an extract from the credit bureau. When applying for the loan, the financing bank will give you your consent to pull out of the credit bureau and enter the loan in the credit bureau.
Alternatively, the bank advisor asks you to provide a credit bureau statement yourself. Of course, reliably fulfilled credit obligations are a positive proof at credit bureau.For future contractual partners, they are a meaningful indication that you take your payment obligations very seriously. Unfortunately, incorrect or outdated data is often entered in the credit bureau. You have the right to have your stored information correct and to delete old or no longer applicable information, provided the legal storage periods have been met. In the worst case, incorrect or old data can lead to a loan application being rejected or a potential customer not awarding a contract to you. With this in mind, you should make sure that your data is correct and that it is correct. It is best to check your credit bureau entries regularly and have incorrect information corrected immediately.
Credit agencies are an important source of data for a credit check of your company
Like the credit bureau as a credit agency for personal data, there are also several credit agencies for the business creditworthiness of a company. These credit agencies also contain data about you and your company. The best known credit agencies for companies are Creditreform and Bürgel. A client or bank that wants to give you a loan can easily find out information about you and your company by submitting a request to Creditreform. As in the credit bureau, incorrect or old information may also be stored in the databases of the credit bureaus. For this reason, you should also remember to keep an eye on your entries at Creditreform and to check them at regular intervals. Keep in mind that it will hardly help you to correct the data afterwards if an order has already been withdrawn and otherwise placed, or if a loan has not been approved. In your own interest, it is better to stay on the ball regularly and always keep your data up to date and correct.
How you can best carry out a credit check yourself
The portal Bankenscore.de offers you a quick and easy way for a credit check. Here you can check your data free of charge and determine your creditworthiness. If it turns out that some information is no longer correct and that there have been changes in the meantime, you have the option of making a correction yourself. So you always have an overview of your latest data and can also intervene if there is something to improve. It is best to schedule a look at your stored data at regular intervals and immediately correct what needs to be adjusted. The current information is always used to assess your creditworthiness. At the same time, you minimize the risk of getting a loan refusal or losing an order because a bank or customer gets their hands on wrong data. As a craftsman, you make an important contribution to the existence of your company and secure the jobs of your employees in the long term.
How to optimize your credit rating
You have now understood how important it is to check your creditworthiness on a regular basis and to keep an eye on your entries in the credit bureau and other credit bureaus. You can do even more to improve the result of a credit check. Keep in mind that a bank will assess your creditworthiness based on current business metrics. It looks at the liquidity of your company, checks the level of equity, the ratio to debt and many other financial indicators that are important for the assessment of your creditworthiness. These key figures are changeable. In principle, they fluctuate with every business transaction. With every booking in your business books, you adapt to the latest contracts. Every incoming invoice, every outgoing invoice, every transfer and every cash payment has an impact on these key figures.
With this in mind, you should have a regular look at your key operating figures. Make an active effort to control them so that your creditworthiness is improved. For example, increase your equity and reduce your company’s debt. Reduce debt and increase your reserves. If you work on strengthening your credit rating every month, there should be no approval problems with an upcoming loan. In the end, you benefit from attractive conditions for the loan, which are based solely on the fact that you can demonstrate a sound credit check result with your company and that you can reliably satisfy your potential lender over a longer period of time.