Which of the following best describes how credentials are initially processed?

The process of handling credentials in ServiceNow Discovery is essential for securing sensitive information during the discovery process. When credentials are initially processed, they are encrypted on the instance before being transmitted to the target system. This step ensures that any credentials used for accessing network devices or applications are not exposed in plaintext over the network, thus protecting them from potential interception or unauthorized access.

The encryption of credentials enhances security, aligning with best practices for managing sensitive information. It helps maintain the integrity and confidentiality of the credentials as they are utilized during discovery scans. This level of security is particularly crucial in environments where sensitive data and resources are being accessed.

In contrast, other options involve methods of handling credentials that do not prioritize security to the same extent. Storing credentials unencrypted poses significant security risks, while validating against a database does not pertain to the initial processing of credentials. Automatically generating credentials would not reflect a method of processing existing credentials but rather creating new ones, which is not the focus of this question.