Credit scoring is a calculation method that provides a credit institution with information about your creditworthiness (quantification of your credit rating).
Credit scoring enables credit institutions to calculate a value that expresses the probability of a business partner defaulting on a payment. A variety of data is used in the calculation.

- Credit scoring is a statistical-mathematical procedure on the basis of which the creditworthiness of consumers is calculated.
- To calculate the credit score, companies use both internal and external data about you.
- You can request all the data used for your credit score by submitting a self-report to the company.

What is credit scoring?

Credit scoring is a scientifically recognized, mathematical-statistical procedure, with the help of which a probability value, the so-called score, is calculated. This provides information about a consumer's future payment behavior.

The score thus represents the creditworthiness of a consumer in figures. Or in other words: the credit scoring procedure calculates the probability with which you, as a consumer, will repay your loan or pay your outstanding bills.

The credit score of credit institutions is very similar to the credit score of credit agencies. The purpose of credit scoring is to facilitate objective contract decisions. This is possible because the calculated score is used to create risk profiles. On this basis, banks can better assess how great the financial risk is when concluding a contract with a consumer. Depending on the score, they can refuse contracts or adjust the terms and conditions.

How does credit scoring work?

A wide range of data is used for credit scoring. These can be internal data of a company or external data.

Internal data

Internal data is the information that a company itself has stored about you.
For example: You have taken out a loan with a bank. The bank stores all information about your payment history and creates a payment history based on this data. This is used as a basis for decision-making when concluding future contracts.

If you have always paid your outstanding installments reliably in the past, the company can conclude that you will continue to pay reliably in the future.

However, if you, as a consumer, have had to be reminded several times of a payment arrears, the company also stores these experiences. It may then happen that you are not granted any further credit on the basis of the credit scoring, or only at expensive conditions.

External data

External data is data that can, for example, come from the consumer himself or from credit agencies. Credit bureaus are private-sector companies that collect economically relevant data from consumers and use it to create risk profiles.

Many companies work together with credit agencies and have agreed to exchange data. This means that the payment history collected by the companies is also forwarded to a credit agency. Although companies cannot pass on your data to third parties without your consent, you usually agree to this when you sign a contract.

Conversely, companies also request external data from credit agencies. These collect, store and analyze various data and information about consumers. From this, the credit score is calculated. This is often included in credit scoring.

The use of external data has clear advantages for companies. You can think of it this way:
Bank A has already had a bad experience with a certain consumer and shared it with a credit agency. The consumer now wants to take out a loan with Bank B for the first time. This does not yet have its own information about the consumer. By now requesting the data from a credit agency, Bank B learns that the consumer has been an unreliable customer in the past. As a consequence, the consumer is denied credit.

What data is used for credit scoring?

For credit scoring, companies and credit agencies collect data about consumers. This includes personal data such as your name, gender, age and address. As described above, information about your payment history is also stored.

If you have not settled your payment obligations after several requests for payment, you may be subject to debt collection or legal proceedings. These are so-called hard negative features that have a lasting impact on your credit score.

In addition, consumers can provide data themselves that is relevant for credit scoring. This data often includes net income, marital status and household surplus. Consumers usually have to provide evidence that the data they provide is correct. For net income, this can be salary slips or bank statements, for example.

How can I check my credit score?

Several times a year, you can obtain all personal data that companies have stored about you by means of a self-disclosure.

You have the same right with credit agencies. In this way, you receive free of charge all data used in the scoring procedure of the respective credit agency - including your score.

You have several options to request your self-disclosure. Either by mail, by email or by self-disclosure form. In most cases, you will be asked to identify yourself so that your data does not fall into the wrong hands. Usually a copy of your identity card is sufficient.