Creditworthiness
Creditworthiness describes the ability and willingness of a person or company to meet their financial obligations.
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Detailed Explanation
Creditworthiness is a measure of the probability that a borrower will fulfill their financial obligations. It affects loan approvals, terms, and contract conditions.
Credit assessment factors: - Income level and stability - Employment status (employed, self-employed, civil servant) - Existing liabilities - Payment history (Schufa Score) - Assets and collateral - Housing situation (renting vs. owning)
Effects of good creditworthiness: - Higher loan approval chances - Lower interest rates - Better contract terms - Shorter processing time
Effects of poor creditworthiness: - Loan rejection - Higher interest rates - Additional collateral required - Limited financial products
Practical Example
A tenured teacher with 15 years of service, no negative Schufa entries, and owning an apartment has excellent creditworthiness. A career starter with a temporary contract and outstanding bills has weaker creditworthiness.
Legal Basis
§18 KWG (Banking Act), §509 BGB