Scoring basis for credit decisions

In principle, just about everyone scores – be it when going to a restaurant or buying a car. Based on past experience or even other people's experience as well as further assessments, we make forecasts for the future and take decisions on this basis.

When credit institutions use scoring to grant loans, they want to achieve something similar: Their goal is to ensure that loans can be repaid. They analyze empirical data on solvency to use it to forecast a customer's likelihood to default. But scoring also comes into play in online trading or insurance companies. For example, a score can also decide whether you can buy online only against prepayment.

Importance of scoring

"Score" in English means as much as number of points. Scoring is a statistical procedure used, for example, to obtain information about the future payment behavior of individuals or companies. It is used by credit institutions, credit agencies such as Schufa and rating agencies. Credit scoring is used for all types of credit transactions and is intended to facilitate fair and objective credit decisions. As part of the credit check, credit institutions determine the score. It lies between 1 and 100. A person seems to be more creditworthy the higher the score number is. 100 percent cannot be achieved, however, as it is impossible to achieve such a high probability in such statistical evaluations. The score value decides whether and on what terms a loan is granted.

Schufa: Basic score versus industry scoring

The best known scoring is the Schufa scoring. A distinction is made between two types of score values: The basic score is given as a percentage in the credit report and is not updated daily. It takes into account the financial actions of each person.

The second type is the industry score, which is calculated on a daily basis. If you order goods on the Internet, for example, you can assume that the supplier will check your creditworthiness – for example, with Schufa. This then transmits to the company the respective Schufa industry score. The percentage value allows this company to estimate how likely it is that the buyer will pay his bill. To become a Schufa contractor, companies must meet many requirements. There are seven different industry scores: mortgage bank (HypoScore), mail order, retail, telecommunications, cooperative banks/savings banks, banks and the Schufa business line.

What data flows in?

The scoring of credit institutions is based on information about the customer, z. B. Personal data or past payment history, and those from credit bureaus such as Schufa accessed. There is no standard scoring procedure, and the calculation of the score remains opaque. According to Schufa, the formula for calculating the score is known to and controlled by the relevant data protection authority and independent scientists.

According to Schufa, important factors for the score calculation are: current account, credit card, guarantee, installment loan, mobile leasing/hire purchase, inquiry about current account, inquiry about credit card, inquiry about guarantee, inquiry about loan, inquiry about mobile leasing/hire purchase, contract and credit periods. Negative impact has non-contractual behavior such as unpaid installments or bills, canceled loans and current accounts with overdraft where outstanding amounts have not been paid, titled and recognized debts, information from debtors' lists and bankruptcy notices, submission of an affidavit, arrest warrant to force the submission of an affidavit.

According to Schufa, however, the following have no influence: Marital status, religion, nationality, salary or assets. Credit obligations do not necessarily have a negative effect. The score can even be better with a current loan than without a loan. However, numerous credit inquiries can have a negative influence. However, the mere request may not be taken into account, which is why Schufa has introduced the feature "condition request".

Consumers can view their score and stored information at credit bureaus like Schufa once a year free of charge and have it corrected if necessary. This is advisable in order not to suffer disadvantages due to incorrect or outdated Schufa entries.

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