How To Get A Credit Score In Spain
Does Spain Have A Credit Score System?
Spain emphasizes credit history but does not use credit scores. The Risk Management Centre is the country’s credit registry (CIR). The CIR tracks all credit and loan activity from financial institutions. In Spain, the emphasis is on negative items rather than a mix of positive and negative items. When consumers have negative items on their credit reports, credit files track them and blacklist them. Consumers can be blacklisted for up to six years or until their debt is paid off.
What Is Credit In Spain?
To understand the process of applying for financing in Spain, we want you to first understand what credit is. In a nutshell, when we talk about credit, we’re talking about a financial transaction involving two parties: a creditor and a debtor.
In this sense, credit is a money loan between a creditor, which is usually a financial institution, and a debtor, who can be either an individual or a legal entity.
The truth is that the person requesting credit agrees to repay the money received gradually or in a single payment within the time frame specified.
However, not just anyone or any business can obtain bank credit because in order to complete the application successfully, you must also meet a number of prerequisites.
What Is A Personal Guarantee?
If you want to apply for credit, keep in mind that, according to the Spanish Civil Code, every debtor has an obligation to respond to the payment of the agreed-upon amount with the corresponding financial entity, using all of his current and future assets.
In this sense, the personal guarantee is understood as a method of securing credit by using the applicant’s own solvency as a guarantee.
However, when more than one person is involved in the operation as a co-owner of the credit, two types of guarantees can be provided:
Joint Liability
In this type of guarantee, the bank approaches one of the debtors for a percentage of the total credit, and the holders then claim the agreed amounts from each other.
Several Liabilities
In this type of guarantee, each debtor will respond to the financial entity with a predetermined amount of credit (previously agreed upon), which represents 100% of the credit granted in total.
Applying for credit is a delicate process that necessitates careful attention to all of the regulations in effect in Spanish financial institutions. TAS Consultancy puts our accounting experts at your disposal to advise you on any procedures you are unsure about.
Requirements
Here are the basic documents required by the lender if you want to apply for business credit, as well as a list of requirements you will need to validate the proper formation of your company:
On the contrary, if you want to apply for credit as an individual and use the money for your own purposes, the requirements will vary depending on the financial institution, the amount of money required, and the purpose.
When these situations arise, the most common documents are usually simple. The first requirement is that you be of legal age and have a good credit history. You must also demonstrate consistent income solvency.
Applicants must also provide their DNI, NIF, or NIE, as applicable, the account number into which they wish to deposit the funds, a photocopy of their most recent paychecks, as well as any other regular income they have, and a brief description of their work history (companies they have worked for, activities they perform, among others).
And what if you work for yourself? For this type of worker, it is customary to include a photocopy of the self-employed registration document, the most recent VAT declaration, and the IRPF fractioned payments with your application.
How Can A Foreigner Apply For A Credit Card In Spain?
These simple guidelines will help you as a foreigner to easily apply for a credit card in Spain. Spain is a beautiful place to live. Despite average job prospects, immigrants enjoy the local leisure options, friendly people, a variety of beautiful cultural and natural attractions, and a pleasant climate. In fact, 79% of expats feel at ease in Spanish culture (compared to 63% globally) and have no difficulty learning the language. However, true comfort in a foreign country is only possible if one can access the local banking system.
Credit cards provide numerous advantages. Having one to supplement your debit account provides people with additional financing options. Non-residents in the Mediterranean country, however, will face more stringent application requirements due to a lack of Spanish credit history.
Nonetheless, if you know what to look for, anything is possible.
Prepare The Documents
You will require identification to prove your age and identity and proof of long-term residency (permanent residence visa). You will also need the foreigner’s tax identification number Nombre de identidad de extranjero (NIE).
Get NIE
You have one month after reaching Spain with a visa to apply for a Foreigner Identity Card. Take all of the documents you need to apply for a visa and submit them to the relevant authorities in the province where you have settled in Spain, such as the Immigration Office or a police station.
Open A Bank Account
You can open an account with most major banks in Spain before moving or after you arrive to live there. Many Spanish banks provide non-resident accounts to those who are only visiting the country. Most Spanish banks include credit cards with their accounts. Foreigners who are not yet permanent residents are unlikely to obtain one. You can apply for a credit card either when you open the account or later.
If you have a non-resident account and become a resident, you must notify the bank. As an example:
- spending 183 days or more than that number per year in Spain
- having a business or employment in Spain
- having a spouse or minor child who is a resident of Spain
Consider Digital Banks
In Spain, a few forward-thinking banks offer online bank accounts and accept applications from residents of multiple countries. Some, such as Revolut and Bunq, also provide credit card options. Opening a mobile-only account usually takes just a few minutes and can be done from your smartphone. To link your account, you must provide an email address, an address, and a mobile phone number.
Work On Your Creditworthiness
Their credit history determines the availability and amount of credit available to any bank customer. Spain does not have a scoring system like the United States or the United Kingdom. Negative credit incidents, such as unpaid debt, are recorded and have an impact on credit decisions. Setting up utility accounts and paying them on time is a good way to start building your credit in Spain. Credit scores are not shared between countries, so you’ll get a fresh start even if you had difficulty repaying a loan in your home country.
How To Check Your Spanish Credit Rating
When you need a mortgage or a loan in Spain, it’s a good idea to check your credit score first. Our post will walk you through the steps, so you know what to expect.
Step One: Make Your Calculations Before Going To The Bank
When banks offer credit, the word ‘desde’ (from) is frequently used before the interest rate. As a result, advertised interest rates are not guaranteed: the best rates will be available only to the best clients.
Banks will only give you a loan or mortgage if the repayments amount to 35-45% of your total income. You can quickly calculate whether this fits in with your income and financial obligations. If it does not, you have two choices: reduce your obligations or increase your income (neither of which is easy!).
Calculate the monthly payments using an online calculator. If you can comfortably meet the repayments, it’s time to proceed to the next step.
Step Two: Check Your Credit Rating
If you are familiar with how credit ratings work in your home country, you may discover that they work differently in Spain.
On the one hand, some organizations offer debtor lists. On the other hand, the Bank of Spain’s Risk Information Centre Report, or CIRBE.
Before agreeing to give you credit, all banks will check to see if you are on a debtor list and will also request a CIRBE report. It makes sense to double-check it first and keep in mind that banks do not require your permission to consult your report.
The CIRBE report contains information on all loans, credit, personal guarantees, and other financial products (categorized as general risks) with a total value of 1000€ or more per institution. A free copy of the report can be requested online (if you have an official electronic signature), by mail, or in person.
Your loans and other risks will be removed from the current CIRBE report once they fall below the 1000€ threshold. Past information is still kept on file, and your bank may request it to see how frequently you request credit.
If you have a credit card, it may be included in the report as well. Like, if you have a credit card with an 800€ limit and a 500€ loan with the same bank, the total will exceed 1000€ on your CIRBE report, even if you have no current spend on your card. This is because you could theoretically spend up to the full credit card limit at any time.
Step Three: What To Do If The Report Is Incorrect
It can take up time for a maximum of three months to add or remove information from the database. If you’ve recently paid off a loan, it may still appear on your CIRBE report.
However, if there is still inaccurate or incorrect information after accounting for the three-month delay, you should take one of the following actions:
- Contact the financial institution directly and instruct them to amend or cancel the report entry.
- Using their online form, request that the Bank of Spain carry out your request.
Step Four: Request Your Loan Or Mortgage
When you’re certain that all of the information on your CIRBE report is correct and that your name isn’t on any debtor lists, it’s time to request your loan.
The bank will continue to conduct its own risk assessment. If you are denied credit, you may need to try again with another bank.
Take caution when using online-only applications. Not all advertisements are for legal or financial services; in the best-case scenario, you may simply be charged a higher interest rate on your loan, but in the worst-case scenario, you may end up owing money to a loan shark.
Final Words
This article will suffice to help you thoroughly in learning about credit scores in Spain. Best of luck with getting a good credit score!