Too many small loans hurt the credit rating

Too large a number of current loans can damage the credit. Many smaller loans seem to be much stronger than a big loan. The peer group procedure could be the reason for credit bureau’s scorings: Anyone who pays smaller and smaller amounts in installments is less creditworthy.
Particularly risky are partial payments in the retail and mail-order business: Electronic stores and retailers are increasingly advertising with partial payment offers. Anyone who agrees to this will sign a loan agreement, which will be reported to the credit bureau by the Mentyr bank – most of whom are trading with a bank.

The credit bureau learns from every loan

The credit bureau learns from every loan

credit bureau itself does not provide any information on the composition of its scores, citing its business secrets. Insofar as studies have provided insights into the impact of credit agreements on scores, these indicate that a larger number of smaller loans will lead to a poorer credit rating.

That is quite plausible. credit bureau protects the creditworthiness of consumers using mathematical-statistical methods. Essentially, this is about: If a person has a high degree of agreement with groups of people who are more likely to default on payments, the score will deteriorate. The connection is obvious: among the consumers, who often agree on installment payments for smaller amounts, there are disproportionately many who are experiencing payment difficulties.

Make loans in the credit bureau “harmless”

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Consumers who regularly pay on installments should seek self-esteem from credit bureau once a year. If the “data overview according to the Federal Data Protection Act”, which is sufficient for this purpose, is obtained, no costs will be incurred. Consumers should check that all data is correct: often repaid loans are not classified as such, which further damages creditworthiness.

Since a good credit rating is indispensable for many of the larger business ventures, it should not be sacrificed for convenience. Outstanding installment payments can be combined into a bank loan. If the current account is covered for an acquisition, high interest rates will be incurred. In terms of creditworthiness, however, the process is undamaged because the credit line is already reported to credit bureau and does not tell it how far the account holder has used the credit line.