What does scoring mean?
In the classification of creditworthiness, different criteria are taken into account, which relate to the circumstances of life. The scoring thus serves as information for credit and insurance brokers, in order to be able to submit a individually suitable offer.
The scoring serves primarily as a protective measure for the consumer. For him, the protection of creditworthiness is at the forefront. Especially in the case of risk levels, the customer should be given comprehensive advice on the possibilities of credit protection and thus be protected against excessive financial burdens.
Scoring as the basis for decisions
Since 2010 customers have the right to obtain information about the data collected at SCHUFA. Various information is collected there to assess the creditworthiness and evaluated by mathematical-statistical methods:
- Information about bank accounts and credit cards
- Completed leases, loans and guarantees
- Mobile phone and mail order accounts
- Installment transactions
- Possible payment defaults
What information is important for scoring?
The risk classification by SCHUFA scoring is only a very basic, if very basic, basis for the evaluation of the creditworthiness of a customer. However, a lot of other information plays an important role. These must be ascertained by the credit or insurance adviser:
- Economic conditions
- Employer and profession
- marital status
It is advisable to take this comprehensive information into account in order to optimally exploit the financial possibilities of the customers and make a meaningful offer. The score as the only basis is usually not strong enough to make an objective decision.
Dilemma of risk management
In addition to the risk professions, the self-employed are also affected when it comes to finding a loan. The score should not be the only criterion for rejection here. This is specified in the Federal Data Protection Act (§ 6a BDSG). Accordingly, the score serves only as a decision-making aid, but not as a basis.
Nevertheless, the individual classification directly affects the terms of the loans. Different monetary institutions, for example, are staggering their credit rates according to the amount of their income. A similar procedure is also used for credit cards. Above all, self-employed and self-employed persons are at a disadvantage, whose income is irregular and subject to certain fluctuations.
Disability insurance is often difficult
The dilemma of the risk groups is twofold: On the one hand, loans for example for a real estate have to accept worse conditions. In addition, the risk of credit default must be considered.
Disability insurance is often priceless here or are rejected directly due to the health check. Only slightly more than half of German households therefore have occupational disability insurance.
For high school graduates, this is often associated with extremely high contributions. Here it is up to the broker to inform the customer comprehensively about the risks involved in the conclusion of a loan - which, unfortunately, often happens inadequately. Above all, the loss of earnings is often treated only insufficiently.
Opportunities for credit protection
The safeguarding of a loan against payment default is an important issue, especially for risk groups, if no occupational disability insurance can be concluded at the same time. There are other possibilities:
- Alternatives to the classic BU: If disability insurance is out of the question, disability insurance is a possible alternative. However, the protection only comes into force when in fact no more work can be done. Dread disease insurance also does not offer comparable coverage, but may be able to absorb some of the loss of earnings.
- Credit protection at high values: The hedge is already included in most loans. Again, the financial service providers are based on the scores in the design of individual conditions. For long-term loans, eligible assets are often used to secure credit. As a mortgage, register deposit or collateral transfer, the values are then used as legal protection until final repayment.
- Guarantee by other persons: This option uses the good credit ratings of third parties to secure a loan. Family members or other relatives can be employed.
In addition, risk-takers in risk groups should make full use of the possibilities of the special repayment in order to be able to repay a credit agreement promptly. Above all, self-employed with fluctuating income can be at a good personal business achieve good effects with the unscheduled payments, For instance, this option should always be granted, especially for high-level loans such as real estate. Before the loan contract is concluded, the customer can discuss various cases and discuss the impact on the credit history.
High standards of data protection
The new Basic Data Protection Act provides binding rules for all EU Member States, including scoring. On the other hand, the Consumer Center urges us to obtain higher standards of laws.
In April 2016, the long-overdue European General Data Protection Regulation (DSGVO) was adopted. The growing cross-border credit and insurance market has made common rules for the individual member states urgently necessary. In May 2018 the DSGVO becomes binding for the individual countries. Up to this point in time, valid, individual data protection regulations must be adapted by the states accordingly.
In order to protect the consumers from the negative effects of scoring, the Confederation of the Consumer Center (vzbv) urges that certain stricter regulations of the German legislation be maintained. Around the current level of data protection, it makes sense to transfer certain clauses into other laws.
In addition to data protection, discrimination is to be kept as low as possible. Due to the regulations of the DSGVO in the future, classifications will only be possible on the basis of address data. The neglect of other important influencing factors can have a negative impact on certain groups of people. Again, the vzbv advises to keep the current paragraph (§ 28b BDSG), which presupposes higher protection standards for consumers.
Individual scoring of banks and insurers
In addition to SCHUFA, many credit institutions and insurance companies have their own procedures or automated calculation procedures to classify the creditworthiness of their customers. Especially at Online credit providers, where no direct customer contact occurs anymore, these individual assessment systems are of great importance.
In order to create trust, it is important that financial services providers also work transparently in the area of scoring. The information of the customers about the composition, handling and processing of the data is important here. In the customer conversation, the usefulness and importance of the scoring can be explained in more detail. Compliance with the relevant data protection regulations is also obligatory for the credit institutions.
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