Credit Check

A credit check is carried out before a loan is granted, at the time of application. When money is borrowed, it must be ensured that the borrowed sum can be repaid to the lending institution or bank without difficulty by the end of the term. For this reason, lenders generally request information about the applicant's financial circumstances. A so‑called credit check is performed.

Types of credit checks

Sufficient creditworthiness of the borrower is an essential prerequisite for being able to repay a loan properly. For consumer loans as well as for construction financing, lenders usually check the applicant's creditworthiness as part of a credit check, mostly using an income‑and‑expenditure calculation that shows the borrower's available funds.

To determine the garnishable portion of income as part of a credit check, the monthly expenses are deducted from the sustainably achievable income; the difference represents the monthly available garnishable income that can be used to pay the loan instalment. The higher this amount, the lower the default risk and the greater the chance of a positive loan decision following the credit check.

Role of income in the credit check

Decisive for including a type of income in the income‑and‑expenditure calculation is its sustainability, because the type of income must occur repeatedly and in any case also during the term of the loan.

For self‑employed persons with irregular income, a significantly more comprehensive creditworthiness assessment is used instead of a simple credit check, taking into account the nature and duration of the income.

The creditworthiness assessment essentially corresponds to the minimum requirements for risk management (MaRisk) legally defined as an implementation rule of the Kreditwesengesetz (KWG). In a creditworthiness assessment, the customer's liquidity is no longer checked only at a specific cut‑off date; rather, all factors and influences that could jeopardize the proper repayment of the loan are recorded, weighted and evaluated in accordance with §18 KWG.

Proven creditworthiness is necessary to determine credit capacity. Credit capacity means that a natural or legal person has the ability to enter into a loan agreement with legal effect.

Other types of credit, such as the lombard loan or advance financing loans, focus primarily on the provision of valuable collateral by the borrower when assessing creditworthiness or conducting a credit check. Securities or commodity inventories financed by the loan can also simultaneously serve as collateral for the loan, and the repayment of loan instalments can be made from the sale of these inventories.

Legal framework of the credit check

The more current and comprehensive the information on the applicant's financial circumstances, the more accurately the credit default risk can be estimated. The procedure for a creditworthiness assessment (or briefly, credit check) is regulated in §18 Kreditwesengesetz (KWG) and must be applied for loans that exceed 10% of liable own funds or a maximum of €750,000.

In addition, the provisions of the Solvabilitätsverordnung (SolvV) apply, which state that – with a few explicitly named exceptions – every borrower must be classified by the credit institution by means of a rating, which according to MaRisk must also include a concrete assessment of the default risk.

The borrower is obliged, within the framework of a loan assessment, to provide all requested information and to submit the required documents. Corresponding obligations to provide information by the borrower are included in the loan agreement and, if not complied with, constitute a ground for termination of the contract.

The provisions of the Kreditwesengesetz oblige credit institutions such as banks to observe specific principles when conducting a credit check. These include risk adequacy as well as the traceability and completeness of the examination process. The principle of risk adequacy means that the risk of a credit transaction should be directly related to the extent of the borrower's disclosure obligations.

Procedure of a credit check

The higher the credit risk, the more extensive the disclosure requirements imposed on the borrower regarding their financial situation. The overall risk of a credit transaction is not only determined by default risk related to creditworthiness and collateral but also by the type, complexity and scope of the commitment.

According to the guidelines of the banking supervision (BaFin) for decision‑making when granting credit, the principle of risk adequacy also applies when the loan amount is below the disclosure threshold of 10% of liable own funds or a maximum of €750,000.

Traceability of the procedure in a credit check means precise and complete documentation of the entire process and the highest possible transparency of the procedure. The result of the assessment must therefore always be logically traceable for external supervisory bodies (for example banking supervision or auditors).

Under the principle of completeness, credit institutions and banks must obtain all documents and other evidence required to carry out the credit check properly and in full, with detailed numerical and data material always forming the basis of the assessment. For companies, this can include current balance sheets and profit and loss accounts; for private customers, detailed self‑disclosures regarding assets, income and ongoing expenses are generally required.

Credit check by MAXDA

In principle, when deciding for or against granting a loan, the lending institution has discretionary scope. Such a decision is always influenced by the lender's liquidity situation. When searching for credit institutions and banks that have available liquidity, loan brokers such as MAXDA can provide valuable support.

There is often the possibility of obtaining a loan even with low income by meeting certain conditions, as shown in affordable loans from MAXDA. After all, financial transactions are fundamentally a matter of trust, so a thorough discussion between the contracting parties can noticeably improve the chance of a positive loan decision. Flexible providers like MAXDA can usually offer a way to fulfil the loan wish even with average financial circumstances.

Getting your desired loan with the right financial service provider

MAXDA is one of Germany's largest financial service providers and is an experienced and competent partner for loans and mortgage financing for its customers. MAXDA works with leading German and European commercial banks. Due to the variety of banks, individual wishes regarding terms and loan processing can be accommodated. Personal support is important to us, the specialists at MAXDA, because we want you to feel confident in the handling of your loan. We prepare an individual offer for each customer. The credit check is also carried out quickly and without red tape.

A copy of the most recent payslip or pension notice and the completed and signed loan application are sufficient. The documents are carefully reviewed by us and terms and possible variants are discussed with you. If the credit check produces a positive result, we will arrange a loan for you with one of the numerous banks from which we obtain first‑class terms for you.

Requirements

A basic requirement to be offered a loan through MAXDA after a credit check is having reached the age of 18 and a regular monthly net income of over €850. If these criteria are not met, a positive loan decision can still be granted if the customer can name a solvent guarantor.

MAXDA offers brokerage of loans ranging from €3,000 to €250,000 for any purpose; special loans without a Schufa entry, up to an amount of €5,000, are also possible. We have many years of experience in brokering loans with and without Schufa entries and usually find a solution even in difficult cases. Our friendly and competent staff are available to assist you with all questions regarding the fulfilment of your loan wishes.