A Credit Rating is an assessment of the creditworthiness of a debtor. The credit rating indicates the probability of full and timely payments by a debtor to a lender. It gives both internal as well as external Credit Ratings. Internal credit ratings are prepared by the bank itself, while external credit ratings are prepared by independent rating agencies such as Schufa. Internal and external credit ratings are used to assess a borrower's credit risk to potential creditors and investors. External credit ratings can also facilitate the issuance of bonds and other debt instruments.
Internal credit rating
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Internal credit rating is a process used by credit institutions and other financial institutions to assess the creditworthiness of borrowers. It is used to assess the credit risks associated with lending to a particular borrower. The internal credit rating is part of a bank's credit risk management and helps the credit institution to assess and manage risks in lending.
External credit rating
An external credit rating is carried out by credit agencies. The best-known credit agencies in Germany are: SCHUFA, Boniversum Creditreform, Bürgel, Deltavista and Infoscore. The credit agencies collect and store data from consumers. The credit bureaus use this data to create an external credit rating, which they then provide to the bank. When a bank waives an external credit rating, it is also referred to as a "loan without Schufa" or a Swiss credit. The name comes from the fact that these loans used to come from Switzerland.
Quantitative criteria of the credit rating
Use internal and external credit ratings measurable quantitative criteria to evaluate the financial situation of an individual or a company.
at private individuals income, expenses and assets (especially in the case of construction financing) included in the quantitative analysis.
at Company the balance sheet or the income statement are relevant. However, the equity ratio, return on sales, return on equity, liquidity, debt-equity ratio and cash flow situation also play a role.These include, for example, the equity ratio, return on sales, return on equity, liquidity, debt-equity ratio and cash flow situation. The bank or credit agency summarizes these criteria in a rating model that assesses the creditworthiness of the company.
Quantitative analysis is therefore largely based on historical data. However, banks are also increasingly trying to look ahead in quantitative analysis. For example, lenders award additional points if the job is considered particularly secure, or are persuaded by investment calculations of expanding companies.
Qualitative criteria of the credit rating
Qualitative credit rating criteria are difficult to measure, in contrast to quantifiable criteria. Banks often obtain the data via questionnaires. Credit agencies, on the other hand, receive the data for qualitative analysis from contractual partners. They then make an assessment of a borrower's creditworthiness based on his or her personal characteristics. These include, for example, the borrower's occupation, place of residence and age. Generally, people in midlife have the easiest time getting a loan. Very young people or people who have already retired from working life often only receive loans based on the qualitative credit rating. Loans with poor credit rating or one Pensioner credit. In the case of corporate loans, the credit rating is enhanced by qualitative factors such as market position, competitiveness and an assessment of future prospects. The industry rating is also a qualitative rating factor. Here, the Schufa considers the outlook of an entire industry.
Classification in the rating classes
The rating is the classification of the borrower into a certain rating class. This classification is made on the basis of the quantitative and qualitative criteria of the credit rating. Rating classes are usually indicated by letters or numbers. The highest rating class is usually the A class, followed by B, C, D and E. The lower the rating class, the worse the creditworthiness of the borrower. The rating classes can vary depending on the credit agency and the credit institution.
With a Schufa base score of more than 9282 points, a rating of A-F, credit is possible with most banks. With a lower rating or a negative feature, however, you have to wait for a Credit despite negative credit bureau or try to have the negative entry removed. This is possible for example via Bonify* possible.
Determining creditworthiness at Bon-Kredit
bon credit* is a credit intermediary that can help borrowers find a loan. To determine the creditworthiness of a borrower, Bon-Kredit uses an internal credit rating system based on quantitative and qualitative criteria. Bon-Kredit uses this to place the borrower in a specific rating class. Bon-Kredit then uses this rating to determine whether the borrower is suitable for a loan and, if so, with which bank. The provider then submits the corresponding application to a bank that matches your credit rating.
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Disclaimer: This is well researched but non-binding information.
