Credit check
Read more about credit checks as a review of financial information and the circumstances in which they may be used.
Explained – what does a credit check mean?
A credit check is a legally regulated compilation of information used to assess an individual’s or legal entity’s ability to pay. It is governed by the Credit Information Act (1973:1173) and may only be obtained where there is a legitimate need, for example prior to lending or entering into a commercial contract. It may include, among other things, payment defaults, debt balances registered with the Swedish Enforcement Agency (Kronofogden) and, in some instances, company board details. A commercial lawyer can advise on when and how credit checks may be used lawfully, including under the General Data Protection Regulation.
When does the credit check question arise?
A credit check becomes legally relevant when a party needs to assess risk before taking on a financial commitment. This includes banks and lenders before granting credit, landlords before entering into a tenancy agreement (including credit checks for landlords and a credit check for a rental agreement), or companies wishing to verify a counterparty’s solvency before a long-term commercial engagement. The issue also arises when complying with rules on sending an enquiry copy and informing the individual concerned.
Points to consider regarding a credit check
Because credit checks are strictly regulated, it is essential to understand the legal parameters for their use. Below are key legal aspects to consider.
- A credit check may only be performed where there is a legitimate need, for example in advance of a credit agreement or for a commercial risk assessment.
- The Credit Information Act requires an enquiry copy to be sent to the person concerned.
- Privacy must be respected: processing must not breach the GDPR.
- Only operators authorised by the Data Protection Agency may provide credit information services.
- Carrying out credit checks without a legitimate need may result in legal consequences.
- Decisions based on a credit check should be documented and reasoned to ensure transparency and legal certainty.
By observing these legal requirements, organisations reduce the risk of unlawful actions and can operate in compliance with applicable legislation across Europe.
Credit check
Why are credit checks important?
Credit checks are important as they provide a legal tool to ensure that lending and commercial relationships are undertaken on sound grounds. The rules strike a balance between the need for risk assessment and the protection of personal privacy.
For businesses, knowing when a credit check may be obtained and how the information may be used is central to legal risk management. It helps reduce the risk of breach of contract and financial loss.
Credit checks also build trust between parties. When both sides know that checks are conducted within the law, transparency increases and long-term commercial relationships are more sustainable.
Frequently asked questions on credit checks
A credit check may only be performed where there is a legitimate need, as set out in the Credit Information Act.
A credit check may include payment defaults, debt balances with the Swedish Enforcement Agency, assessed income and, for companies, board details and the annual report.
By law, an enquiry copy must always be sent to the individual to whom the credit check relates. This is a central element of transparency in the credit-checking process.
A credit check is used to identify financial risks before entering into a contract. Typical risks that can be assessed include:
- Payment defaults
- Debt balances and ongoing matters with the Swedish Enforcement Agency
- Historic payment patterns
- The financial position of companies via annual reports
Only companies authorised by the Data Protection Agency may conduct credit information activities. This is a clearly regulated sector with strict requirements for handling personal data.
Read more about our services
Licensing
Morling Consulting provides support on licensing matters when your business is launching or scaling a financially regulated service. We assess whether authorisation is required, which authorisation is relevant and how the operating model can be structured, so that business and compliance present a consistent position in dialogue with partners and the Financial Supervisory Authority (Finansinspektionen).
Supervision
Engage support during supervision when requirements must be met promptly, in a structured manner and with the right messaging, including under CCD2. We conduct gap analysis, prioritise actions and prepare documentation that stands up to scrutiny, including policies, procedures and governance materials.
Compliance
We support fintech and broader compliance work when rules must be translated into processes, accountabilities and controls that work in day-to-day operations. Morling Consulting establishes governance, training and a control framework, links requirements to business processes and suppliers, and makes compliance traceable over time.
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If you prefer phone, please feel free to contact Felix Morling at +46 70 444 42 85
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