Social Welfare recipients receive the above-mentioned benefit as the main beneficiary or a member of a community of needs either due to longer-term unemployment or as a so-called increase if their income from work is insufficient to meet basic needs.
Consumers often do not refer to the credit protection association as Credit bureau, but rather the existence of negative entries in its file. Consumers forfeit a negative entry in the event of serious payment offenses. With regard to the consequences, a distinction between soft and hard negative entries is necessary.
Borrowing during a Social Welfare subscription
Banks grant loans for Social Welfare recipients, despite Credit bureau entries, more reluctantly than loans to applicants with regular income, so that a soft negative entry often leads to a rejection of the loan application for this group of people. The easiest way to get a bank loan despite your own Social Welfare reference and the existing Credit bureau negative entry is to provide a guarantor or to apply for a loan with a co-applicant.
The legal situation explains why the bank places higher demands on the guarantor’s financial performance than that of a co-applicant. In contrast to a co-application, courts can declare a guarantee ineffective if the bank, when carefully processing the application, has to notice that a guarantor is overwhelmed financially. Anyone who has successfully applied for a credit line before the Social Welfare purchase and before a Credit bureau negative entry is forfeited can continue to use the corresponding credit as a Social Welfare recipient despite the Credit bureau entry.
This is particularly true for promised call credits, since overdraft facilities are usually adjusted to a change in income. When using existing loan commitments, however, it is essential that the Social Welfare-subscriber ensures that the minimum repayment is made as agreed, since a violation of this will regularly result in the termination of the call credit.
Borrowing outside a bank
For orders in the mail order business, earmarked loans for Social Welfare recipients are easy to obtain despite the Credit bureau negative entries, provided that the consumer concerned is already registered as a customer with a mail order company. With rare exceptions, a Credit bureau request is only made when a new customer is ordered for the first time, while the payment behavior is then used as a benchmark for the internal credit rating. This procedure means that despite the Social Welfare connection, the customer must ensure that the installments are paid on time so that they do not lose the opportunity to purchase on account.
If you have a sufficiently valuable and marketable pledge, you can also take out loans for Social Welfare recipients in the pawnshop despite the Credit bureau negative features. There is neither a demand for income nor a Credit bureau request because the pledge represents sufficient credit security. Before taking out a loan, Social Welfare recipients with a negative Credit bureau should check whether their planned purchase is an urgent need and is therefore entitled to an interest-free loan from the job center.