A credit bureau is a privately held company that collects information about consumers and businesses and sends it to businesses on request . Through the collection of data and information, a credit agency can make any statement about the creditworthiness , ie the solvency of a consumer. The credit bureau handles inquiries from lending companies and mail order companies in order to secure themselves in the event of a contract.
The credit agency also gives no guarantees for the creditworthiness granted to a consumer. It can only pronounce on the basis of the collected data calculated probability for the fulfillment of the contractual obligations. As a rule, credit companies, as well as mail-order companies, closely follow the recommendation of the credit bureaus. Good scoring at credit bureaus is important. Only persons with good information from a credit agency are considered creditworthy. The most well-known credit reference agency in Germany is Schufa, which has a very large database of consumer data. However, younger credit bureaus such as Infoscore and Creditreform have lost their monopoly position in Germany.
What tasks do credit reference agencies have to fulfill?
First and foremost, a credit bureau collects the information about consumers and businesses that companies send to them. The credit bureau uses a scoring method to determine the creditworthiness of consumers and companies. Every credit at a bank is also reported to a credit agency. If all transactions reported to the credit agency, loans and installment agreements are good, then the positive score of the consumer does not change. The credit agency deletes contracts after the end of the contract period if everything is regular. If the consumer has paid his installments unreliably or has dropped out of the contract unlawfully, this behavior is stored in the credit bureau .
This information is then passed on to the requesting companies. Such information is a negative entry that lowers the overall score of the consumer. If a consumer who has proven to be an unreliable customer in the past would like to apply for a loan from a bank, it is unlikely that he will receive another loan. The credit reporting agency also has obligations to the unreliable consumer. On request, she must provide him with all data stored about him in the form of self-assessment. Negative entries must be deleted after expiry of the statutory periods, usually after three years. Consumers have the opportunity to improve their Schufa score by, for example, reconciling data.
What content and data do the different credit bureaus collect?
A credit bureau collects purely personal or company-related data.
Data of private persons
For individuals, the name, date of birth, address and marital status are recorded. Depending on whether bank accounts are available, they are reported to the credit agency. These are harmless data that have little impact on the creditworthiness of the consumer. “Hardly” because a better residential location actually causes a slightly better score than an address in a social housing estate, regardless of payment behavior. Now, the information relevant for the determination of creditworthiness is added. These include all bank transactions reported to the credit agency, mobile phone contracts, installment agreements, leases and much more. Almost every longer-term financial obligation of the consumer is reported to the credit bureau. This is a basically pure storage, which will be deleted after the end of the contract period or full repayment. In addition, credit bureaus use the data to calculate a score that indicates the probability of repayment in a loan transaction. There is not a score of 100 percent. With a score of 98 percent you have a good information, the score is lower than 90 percent is a very poor value, which is usually granted no credit.
Data from companies
Estimating the creditworthiness of a company is many times more complicated than with private individuals. The basic data stored about a company are the company name, the company identification, the branch offices, the basic structural data as well as business figures, for example the number of employees . In order to determine the creditworthiness of a company, many items must be considered. For example, assets and liabilities of a company are often included in the calculation to minimize the credit risk for the requesting company. In the case of a larger and more complex company, extensive research can be commissioned from credit bureaus. Also in the division is often worked with a scoring. As a rule, a comparison is made with the values of other companies themselves industry in order to make a statement.
What are the obligations of credit bureaus regarding self-disclosure?
Each consumer has the right to have the data stored about him or her in a credit bureau. The credit bureau is obliged to disclose the stored data at the request of the consumer and to inform the consumer in writing. The credit agency is obliged to provide this information only at the request of the consumer , and does not need to inform the consumer when it starts collecting data about him. Once a year it is possible to get a free information from a credit agency such as the SCHUFA , all information beyond this is subject to a charge.
What are the reasons for requesting information?
Businesses turn to credit bureaus for information about a customer’s credit rating. As a rule, the credit report is obtained before the conclusion of a contract with financial obligations. Classic examples include the conclusion of a rental agreement, the conclusion of a mobile phone contract, the usual household supply contracts and of course all variants of credit and installment payments .
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