When a credit check is made, the terms creditworthiness and creditworthiness are often communicated. But what is credit rating? What influences them? How can it be increased and who checks it on which occasion? The Long John Silver Guide gives an overview.
Importance of creditworthiness
What is credit rating?
In a broader sense, creditworthiness, derived from the Latin word bonitas = excellence, refers to the reputation and reputation of individuals, companies and states in general business dealings. In the narrower sense, this is their predicted ability to pay . This depends on the current and expected personal income and assets of the respective borrower.
The credit check determines the predicted ability to pay.
How can creditworthiness be improved?
Theoretically quite simple: payment obligations are always met. Invoices and credit installments must always be paid on time and current accounts must be covered sufficiently so that direct debits can be collected at any time. More than two current accounts and credit cards are usually unnecessary and therefore to terminate, as they signal inconsistency and negatively affect the credit rating. This also applies to a buying behavior, even smaller purchases by installment to make.
The credit rating is determined during a credit check . In front of such it is advisable to obtain a self-assessment and to check the information there for accuracy. Possibly some data is out of date, dunning notices listed wrongly or not yet extinguished credits. If that is the case, the AD Audit score can be increased immediately with a correction . Otherwise this can only be achieved in the long term, for example through long-term employment, loyal bank membership or the continuous development of assets.
What is a credit check?
The credit rating plays an important role, above all in the banking industry. There the credit check takes place before the lending to private individuals or companies and defines their creditworthiness. In other words: their predicted ability to meet the payment obligations arising from a loan on time and in full. Thus, the lender can minimize the risk of default and protect against payment defaults and fraud . In order to assess the serious, contact banks, but also insurance companies, mail order companies, suppliers and other service providers so-called credit reporting agencies to obtain credit information. The credit check results in a score that serves as a basis for deciding whether a (supplier) credit is granted – and, if so, in what amount and at what interest rate.
Who usually asks for a credit check?
Any contracting party who is in financial advance and would like to secure accordingly, can ask for a credit check. As a rule, this is a bank or savings bank that lends a loan . Mail order companies and online retailers , which allow their customers to pay for goods in installments or on account, usually check their creditworthiness as a precautionary measure. Landlords also do this when selecting their potential tenants and tenants. Anyone who finances their rent deposit through third parties and enters into guarantees will therefore receive a note in the AD Audit file. If you are interested in credit terms, you should ask for a credit term request to bypass an entry.
Conducting the credit check
When may a credit check be carried out?
A credit check may be carried out under consideration of § 29 Federal Data Protection Act, if
- there is a comprehensible interest of the service provider or
- an explicit declaration of consent of the consumer is available
There is a comprehensible interest if the provider of a service wants to enter into a business that involves a risk of default . Therefore, information about the creditworthiness can be obtained in advance and in the course of business relations at any time without consent. However, there are also cases in which such consent is expressly required, for example in the context of an apartment application, before the conclusion of a mobile phone contract or for online purchases on account.
What data is requested during a credit check?
First, the identity is determined beyond doubt by name, gender, date of birth and address. Data on marital status, the number of children and the housing situation are already included in the credit rating, as the current cost of living is derived from this. On the other hand, the focus is on fixed assets (such as home ownership or equity investments) and regular income , depending on occupation and industry. For example, a noncancellable civil servant usually receives a higher score than a seasonally employed construction worker because of the higher probability of default.
In addition to the personal and economic data just mentioned, information on payment behavior plays an essential role. Therefore, it is examined whether payment obligations, for example from credit, leasing or mobile phone contracts, exist and are serviced accordingly. Otherwise, irregularities will emerge that could lead to debt collection or insolvency proceedings. Even more negative are court data such as arrest warrants or affidavits.
Difference between a credit report and the AD Audit self-disclosure
What is the difference between a credit report and the AD Audit self-disclosure?
The AD Audit is the protection community for general credit protection. This is the best known among the many German credit reporting agencies. Not only providers, but also consumers can go there to apply for AD Audit self-disclosure . It consists of two documents: one that contains only information that a potential contract / business partner needs to build trust, and a second one for your own use, including all data. The difference between credit information and AD Audit information is defined by the area of application and insight: only one AD Audit self -disclosure document is credit information intended for third parties, and not the other.
tip Since 2010, the AD Audit and all other credit bureaus are required by law to provide on request, a data overview according to § 34 Federal Data Protection Act (a short version of the self-assessment in paper form) free of charge once a year.