Risk management

What is a credit check?

A credit check is when the credit rating of a contractual partner is checked before the contract is concluded. A credit check entails a detailed analysis of the perspective partner's payment behavior as well as the likelihood that they will default on the payment. In this way, the ability and readiness of a debtor to pay future debts in full and on time can be checked before entering into a contract with them.

How do credit checks classify shoppers?

After a credit check is performed, the respective person is issued a credit rating as a score. Depending on the credit rating, an online merchant can decide whether to do business with a shopper as well as which payment methods to offer them. This allows merchants to do business even with persons with a poor credit rating by offering secure payment methods such as prepayment or cash on delivery.

What is a credit score?

A credit score is a number that offers as objective a prediction as possible about a shopper's credit rating. First, experience and values on a shopper's credit standing are collected and analyzed. Companies can use this statistical analysis to decide whether to offer the shopper credit and to set interest rates. The goal of assigning a credit score is to allow merchants to avoid risks and minimize payment defaults.