The term creditworthiness is generally equated with creditworthiness. It describes the probability that a private individual or a company can repay a loan taken out. Conversely, it describes the risk of default. To simplify this, the creditworthiness is recorded quantitatively using a numerical value. This is called a credit score.
Creditworthiness is therefore a decisive factor for banks and contract partners when deciding whether and on what terms a contract or loan is offered.
What information is used to determine the creditworthiness?
Examples of factors that influence creditworthiness are:
- the general financial situation of a company
- historical business deals
- the reliability of paying invoices from suppliers or service providers
- the reliability with which existing loans are settled
- demographic factors such as age of the company, change of manager, branch or branch of industry
In the case of smaller companies in particular, the management’s private credit rating also counts. Negative features such as personal bankruptcy or personal collection procedures should not be underestimated.
Who determines a company’s creditworthiness?
In the case of a loan, the bank from which a loan was requested will determine your credit rating. It usually extends the above information with other data such as current business figures, business evaluations and account data. Together, this results in the creditworthiness of your company.
In addition, there are various credit bureaus in Germany that have established themselves as information service providers for banks and other contractual partners, for example Crif Bürgel, credit bureau or Creditreform. These have specialized in the determination of creditworthiness information and the calculation of a credit score for companies and private individuals.
Where can you find out the creditworthiness of your company?
Credit should always be part of your medium and long term financial planning and financial management of your company. Keeping an eye on creditworthiness is particularly useful if a major investment is planned in the near future or an existing contract is to be changed.
You can query your credit rating at a credit agency once a year. In most cases, you have to send a written application by post or at least fill out an online form, after which the credit rating information about your company will be sent to you. The leading credit agency in Germany is Creditreform. But other credit agencies such as CRIF Bürgel or credit bureau also offer you free self-disclosure once a year.
You can find out why your company’s creditworthiness report can contain errors, how these can affect a credit inquiry and what options you have to correct these errors by reading this link.