How do credit bureaus obtain information
Credit bureaus know that about consumers
Order clothing by mail order, open a current account and spontaneously buy the flat screen in an electronics store in installments - every consumer leaves his mark when he concludes sales contracts. Certain data that is left behind end up in a credit report. The following article shows which data is stored, what impact this has on credit and how consumers can view their data.
the essentials in brief
- A credit report collects data but does not check it for accuracy.
- Incorrect data can be corrected at the request of the consumer.
- Credit bureaus work with contractual partners who provide them with the data.
- Consumers have the right to free information about the stored data.
What is a credit report?
A credit report is a company that collects data about individuals and / or companies that are related to business and payment behavior as well as contractual loyalty. In addition, personal and company-related data are stored. Among other things, this information is held by persons:
- Name, (previous) addresses, place of birth and date of birth
- Opening of bank accounts such as current accounts, basic accounts, garnishment protection accounts
- Conclusion of installment loans
- Possession of credit cards
- undisputed claims
- enforceable title (enforcement notice)
- Cases of fraud and abuse in terms of identity and creditworthiness
- Entries from public directories / official announcements (e.g. entry as managing director or authorized signatory in the commercial register)
- Score value
For this purpose, a credit report works together with contractual partners who provide it with relevant information. However, it does not check this for correctness, it just gathers them. The usual contractual partners for a credit report include, for example, banks, insurance companies, mail order companies, retailers (furniture stores, electronics stores, car dealerships and others).
Anyone who has ever bought a device in installments from an electronics store will probably remember the contract that had to be signed. In this contract it was likely that the borrower would agree to that the electronics store gets a SCHUFA information. SCHUFA is a credit report which, on the one hand, issues consumer data upon request by its contractual partners - in this case to the electronics store. On the other hand, in return, she receives detailed information from the electronics store if the contract is concluded: how high the loan amount is, whether the payments are made regularly and when the repayment is complete.
In addition, consumers have the option to enter or have entered data in a credit report yourself. It is also possible to view existing information and have it changed if it is incorrect or no longer correct.
Influence of the data stored by a credit reporting agency
With the help of this information and taking into account the aspects mentioned above, such as the number of credit activities, the credit report determines a number, the so-called score value. This indicates how things are going with the consumer's payment behavior. The score provides a concrete indication of the likelihood that someone will repay a loan. The base score reflects a general assessment of the probability of repayment.
The best score with 100 percent is generally not available. The value would mean that a default is excluded, but that is not realistic. Even if a consumer has never been guilty of anything, he is not immune from fate. Something can happen to anyone that makes it impossible for them to meet a payment obligation. The loss of a job or a serious accident can turn your whole life upside down in no time and ensure that installments remain unpaid. There is therefore never a 100 percent guarantee of payment.
A credit report like SCHUFA provides its contractual partners with different scores:
- For example, there is a score that says something about the repayment probability of a car loan.
- Another relates to real estate finance, the next to mail order.
- This means that a mortgage lender receives different information than the mail order business.
- In fact, payment behavior and the likelihood of repayment cannot be lumped together in all industries, and for this reason the contractual partners of the credit reporting agencies agree on special industry solutions.
What is the use of a credit report?
If consumers want to buy something on account, take out an installment loan or take out mortgage lending, then the contractual partners grant them a loan. The mail order company, the installment lender or the mortgage lender run a certain risk that the customer does not pay or does not pay on time.
Before they blindly send something to a new customer or provide a large sum of money, they want to know whether the consumer is likely to settle the loan granted. To do this, they access the credit report and use the information provided to decide whether to take the risk or not:
If a consumer has always behaved correctly, perhaps has already proven in the past that he has regularly serviced a loan, this is reflected in a positive score. The probability that the next loan will also be reliably repaid for a comparable amount is high. This presumably means that the lender is ready to enter into the loan agreement.
The opposite can also happen: If the information from the credit report suggests that the payment behavior is not so good, for example because several seizures have already been documented in the past, the mail order business rejects the purchase on account and only delivers against Payment in advance.
Credit Report and Lending - How Are They Related?
Banks also use the credit reports. They are an important part of the basis for the credit decision. An example:
Assume that a potential construction borrower has a debt of 1,000 euros with a mobile operator, which is currently being collected by garnishment. That doesn't throw a good light on him. If the credit report also shows a poor credit rating, it should be difficult to obtain the loan. Due to the undisputed debts and the demonstrated lack of willingness or ability to pay and due to the generally poor credit rating banks will most likely refuse to work with this customer.
A credit report thus helps the respective contractual partner to better assess the risk of payment default. It influences the decision to a considerable extent. But credit bureaus are also from the consumer's point of view not to be rated negatively per se. Those who pay their bills on time and have impeccable information increase the chances of getting a loan.
Which credit bureaus are there?
There are several credit bureaus in Germany, the best known are these:
- SCHUFA Holding AG - It is the largest credit report in Germany. Over 80 percent of all Germans are recorded here.
- Creditreform e.V. and Boniversum - Together, Creditreform and Boniversum have over 110 million data records. The companies are also active in the debt collection business.
- Avarto Infoscore - This credit agency is mainly to be found in the mobile phone sector. Infoscore also appears frequently when it comes to online trading. Avarto Infoscore is associated with the Bertelsmann Group. The company has records of around 8 million consumers and attracted attention a few years ago due to geoscoring. The home data of consumers are taken into account in the credit rating.
- Bürgel - The Bürgel credit report is active in the area of online trading and dealer loans. It has data sets from around 40 million customers.
How do I find out what data credit reporting agencies store about me?
The right to free information about the stored personal data is anchored in the Federal Data Protection Act (BDSG). The obligation to provide information applies not only to credit reference agencies, but to every company that stores personal data.
Using the example of SCHUFA, it can be explained how consumers can find out which data is stored about them.
- On the one hand, the credit report offers the legal possibility to request the data in writing. This is free of charge once a year, with SCHUFA providing a corresponding form online. However, the information itself is sent by letter.
- On the other hand, it offers paid access, which consumers can use to access their data at any time. More information is provided in the paid service packages than in the free self-assessment. For example, consumers can check who is collecting information about them, they are automatically informed of the activities of potential and existing contractual partners on their account, they can follow the development of their scores and it is possible to have incorrect entries corrected quickly.
Anyone who needs the credit report for a rental agreement, for example, should take care of the free self-assessment at an early stage. It can take a few weeks for the letter to arrive. If it has to be quick, the only way to do this is to obtain information that is subject to a charge - it is available online.
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