That is the Credit bureau
The company, which is also known as a credit agency, was founded in 1927 with the idea that companies exchange their payment experiences with customers: positive aspects such as payment by installments, but also negative information such as possible payment defaults. To this day, the role of Credit bureau is to collect this information, to save it and to pass it on to the companies belonging to the protection community.
Credit bureau currently stores data from 67.7 million people. On the other hand, there are 9,500 companies such as banks, savings banks, stationary or internet retail companies, telecommunications companies, energy providers who can access this collected data.
This is how Credit bureau works
Today, the company always comes into play when it comes to loans: with classic loan inquiries or deals with banks, with leasing contracts and installment payment agreements, such as when buying a car or when concluding a mobile phone contract, if the monthly statement is only made after the telephone has been used. But also when consumers open a customer account with an online merchant, order goods and pay for them on account, or when a rental agreement has to be signed.
In such transactions, the respective banks, dealers or landlords make a so-called credit check at Credit bureau. They want to find out how high the risk of default is when they do business with this customer. Credit bureau has saved data on each customer’s payment history. Upon request, Credit bureau will provide the company with this information, including an assessment of the creditworthiness. The aim is to minimize the risk of default on the part of companies.
Credit bureau collects this data
The core task of Credit bureau is to collect and analyze data from consumers. To this end, it works with companies that are members of the protection community. Credit bureau receives customer information from these companies. It stores, for example, name and date of birth, number of current accounts, whether credit cards and mobile phone contracts are available, current installment or leasing contracts, current or repaid loan contracts or which mail order companies have customer accounts.
In addition, Credit bureau collects information on whether the customer meets his payment obligations on time. If so, this has a positive impact on Credit bureau. However, it also collects information on whether there is a failure to pay, dunning notices or a loan cancellation by the bank. Such events result in a negative Credit bureau balance. Credit bureau determines the creditworthiness of the customer from the sum of such positive and negative entries.
That’s what the Credit bureau Score is all about
A consumer’s creditworthiness is reflected in his so-called score. This is a percentage value that Credit bureau determines from the data collected for the respective customer. According to Credit bureau, the basis for determining score values is, for example, the number and type of credit activities, possible payment defaults or information about when someone has had experience with credit transactions.
Credit bureau does not disclose the exact calculation method. That has brought her a lot of criticism. It remains unclear what weighting individual payment transactions or defaults have and how an individual payment behavior can be read from them. A score that is above 95 percent is considered good.
The Credit bureau itself says that individual characteristics on their own often have little or no influence on the score. The interdependencies of individual information are statistically relevant. In addition, depending on the remaining data situation, a certain characteristic can have a positive as well as a negative or no influence at all on a person’s score.
What is certain is that Credit bureau compares and compares the collected data on one person with a large number of data on other people with similar characteristics. Of course, the risk of default that these comparable data records show in the past plays a role.