Schufa is one of the most powerful organisations in everyday life in Germany, shaping who gets a flat, a loan or a phone contract. Here’s a look at how Schufa is trying to improve.
If you have ever rented a flat, signed up for a mobile phone contract or applied for a loan in Germany, the chances are that one name loomed large in the background: Schufa.
For foreign residents, especially those new to the country, few institutions are as influential – or as mysterious. While the correct word for “credit score” in German is Bonität, many people simply say Meine Schufa for “my credit score”.
In fact, Schufa is an abbreviation. Short for Schutzgemeinschaft für allgemeine Kreditsicherung (General Credit Protection Association), it refers to Germany’s dominant credit rating company. Based in Wiesbaden, Schufa collects information on the financial behaviour of individuals and companies, drawing on data from banks, landlords, utilities and telecoms providers.
From this, it calculates a creditworthiness score intended to signal how likely someone is to pay their bills on time. This in turn can have a significant impact on the conditions under which loans are offered, including interest rates, for example.
Schufa
While competitors like Creditreform Boniversum, CRIF Bürgel and Informa exist, Schufa dominates the market. It holds data on around 68 million people in Germany and is estimated to control roughly 80–90 percent of the credit-check market.
For years, critics have argued that Schufa scores are opaque, overly complex and difficult for ordinary consumers to understand.
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In response to mounting pressure – including court rulings at European level – the organisation has now introduced a series of reforms aimed at improving transparency and user experience.
What residents need to know about the reforms
At the heart of the change is a new, simplified Schufa score, introduced on Tuesday. Schufa says the aim is to allow consumers to understand, free of charge and “completely transparently”, how their creditworthiness is calculated.
Instead of a complex system of different scores, there will now be one standardised score ranging from 100 to 999 points. The higher the score, the better the assessment of creditworthiness.
Schufa has also made public the 12 criteria that feed into this score. Each criterion carries a different weighting, but all are now visible. They are:
- Payment defaults
- Age of the oldest bank account
- Age of the oldest credit card
- Age of the current address
- Age of the most recent credit line
- Number of inquiries and applications for checking accounts and credit cards in the past twelve months
- Number of inquiries outside the banking sector in the past twelve months
- Instalment loans taken out in the past twelve months
- Longest remaining term of all instalment loans
- Credit status
- Mortgage
- Existence of an identity verification
Schufa says that consumers will now find it easier to see how their score is calculated and understand how certain actions – such as a credit inquiry – might affect it in future.
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Access to individual scores is provided through a new Schufa account, available via app.schufa.de or the Schufa app.
Registration is required, as is identity verification, for example using an electronic ID card or a PIN letter sent by post.
As before, residents can also request their free annual data disclosure directly from Schufa to check what information is stored about them, potentially an important step for spotting errors and disputing incorrect entries.
With reporting by DPA.