A credit assessment, also known as a credit check, is used to assess the solvency of companies and individuals. Usually, consumers are subject to checks when applying for a loan or to pay for purchases in instalments.
The assessment is basically an evaluation performed on the ability of a debtor or contracting party to repay before a transaction is concluded. Since both the creditors and companies want to protect themselves against possible payment defaults before entering a business contract, checks are carried out.
For this purpose, credit agencies calculate the probability values (credit scores) which can be used to express the likelihood of default. The more data a credit agency has on the consumer, the more accurate and reliable it can make statements about the risk of default by that consumer.
Credit assessment is the reputation of a person or company in terms of solvency or creditworthiness.
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