Every credit request with a bank is linked to a credit check via a credit agency. This helps the credit institution to assess whether or not the applicant is likely to meet its obligations to repay the loan. Even for purchases made over the Internet that are made on account, the dealer will usually check the creditworthiness of the customer.
Without the consent of the person concerned, it is not possible to request data from the credit agency, and this must always be done in writing. However, if the customer refuses to do so, the desired credit, cell phone contract or purchase contract on account will hardly come about.
Hard and soft factors for creditworthiness
A negative credit check does not necessarily mean that the contract is not concluded. Here, both the soft (earnings, professional activity) and the hard (debt, judgments) factors determine the rating of the credit rating. Only banks have the right to receive all entries from the credit agency. This includes, for example, entries about the frequency of loan applications or positive entries such as timely installment payments.
Mail order companies, online shops and other companies with a “legitimate interest” in a credit check only receive negative data such as unpaid loans, reminders, court orders and affidavits, as well as warrants under the Federal Data Protection Act. Therefore, many companies rely on credit agencies that specialize in negative entries and scoring (credit check based on statistical values).
Data from private credit agencies
The creditworthiness of a customer depends on many factors. The creditworthiness should not be confused with a credit agency entry itself, which is often mistaken for ignorance. As a private data collector, the credit agency collects positive data as part of a loan, such as punctual installments, as well as all negative data.
Although these data are used for so-called scoring, the statistical classification on a credit rating scale, they ultimately say nothing about the actual credit rating, on the contrary. A positive entry at a credit agency, for example through the regular repayment of an installment loan, can definitely be rated as positive by a credit institution, a mail order company or a mobile phone provider as part of a credit check.
Ultimately, the acceptance or rejection of a loan, a mobile phone contract or an online purchase on account is always an individual decision of the company involved. It happens that despite a negative credit check, the applicant receives a promise, but with higher premiums.
Geo-scoring is not possible without restrictions
There are no clearly defined and legally binding criteria for assessing creditworthiness. This is also because there are now numerous different credit bureaus with different methods and procedures. Each of these credit agencies works with a different system of data collection and scoring, and not all data of a consumer are recorded to the same extent and with the same rating at all credit agencies.
Theoretically, it is conceivable that a customer will get a promise in one case and a rejection in the other due to different scorings. Not all credit bureaus work with geo-scoring, which others use for a customer’s credit rating. In geo-scoring, the home address or the last home addresses of a person are included in the credit check. Anyone who lives in a residential area with a poor social environment and many indebted neighbors has bad cards, even if they themselves have no bank or other debts.
The fact that you live or have moved to such an area (keyword: social descent for financial reasons) can lead to a negative rating or downgrading on the scoring scale, depending on the credit agency’s company philosophy. For example, consumers fall out of all the clouds when, for example, they are refused a purchase on account without having any debts or late payments. However, geo-scoring is controversial and, according to the Federal Data Protection Act, must not be used to the detriment of a person without restrictions.
Free personal information according to the Federal Data Protection Act
If you want to know exactly what your creditworthiness and position on the scoring scale are like, you can request information from a credit agency. The bank or the company itself, which refuses a loan or a purchase contract after a credit check, is not obliged to provide information about the reasons and the sources used. The credit agency, however, must provide personal data according to §34 I, IV BDSG (Federal Data Protection Act) once a year to the applicant free of charge, without gaps. The information will be sent to the applicant by normal mail.
Such self-disclosure is also available several times a year for a fee. As a preventative measure, it is advisable to request a free personal report once a year in order to have incorrect or outdated entries deleted. In any case, it makes sense to obtain such information on your own in order to clarify and, if necessary, correct your creditworthiness before planning a major financial transaction such as a loan or cell phone contract. This eliminates uncertainties and creates a more confident position vis-à-vis the bank or other companies if anything is unclear.