schufa

Schufa

Almost everyone who has ever rented an apartment or a house in Germany knows it: no SCHUFA certificate, no apartment. But why is that? For landlords, there is nothing worse than unreliable tenants, i.e. those who do not pay their rent and treat the rented apartment or house badly. In order to at least assess your financial reliability, the landlord needs more information and requires various documents from you as proof of your reliability. One of the most important documents that almost every landlord will ask for is a current Schufa credit report.

What does the SCHUFA credit report say?

SCHUFA can provide you with various documents. The classic SCHUFA report contains a certificate which will hopefully tell you that you have a positive credit history. In addition, the report contains information about bank accounts, consumer loans or cell phone contracts, which are not relevant for the landlord. That is why there is also the SCHUFA BonitätsCheck, which reveals only the relevant information to the landlord by certifying your credit rating. Only in case of negative characteristics, further information is disclosed. Therefore, the SCHUFA BonitätsCheck is recommended when initiating a rental relationship.

What exactly is SCHUFA?

SCHUFA is the abbreviation for Schutzgemeinschaft f√ľr Allgemeine Kreditsicherung (Protective Cooperation for General Credit Safety) and is operated by Schufa Holding AG, the largest credit agency in Germany, which is responsible for recording and evaluating your credit score and for providing Schufa reports. 

Normally, every person in Germany who gets a bank account, loan, or fee-based contract designed for the long term is reported to SCHUFA. In addition, positive and negative characteristics are registered. This file is used to determine exactly how good your credit rating is and how well you can repay debts. This allows banks and other financial institutions to determine how reliable you are when it comes to granting you a loan, for example.  

Your credit score is just that: a score. This ranges from 0% to 100% and depends on your credit history and registered financial reliability. Generally, a score between 90-100% is good to very good and means you’re a relatively low risk when it comes to paying off future debts. 80-90% is a slightly higher risk. 50-80% is a fairly high risk. Anything below 50% means there is clear evidence that you have at least one outstanding payment. And below 30% means you are unlikely to be able to pay your debt in full.

How to request a SCHUFA report or credit check

Usually, the prospective tenant obtains the SCHUFA report and presents it to the landlord. However, the landlord can also request the SCHUFA report if he has an explicit, written confirmation from the person concerned.  

A one-time SCHUFA report costs ‚ā¨29.95. Usually, landlords accept a Schufa report up to 3 months old before it is considered no longer current enough.¬†¬†

There are several ways to apply for a Schufa report: 

РYou can submit an online application and get a Schufa credit report immediately. This is usually the easiest and most effective method, meaning all landlords will accept it without question. This is possible, among others, on Hominext. 

– You can go to your nearest Postbank or Volksbank and ask for the report in person. Sometimes they provide self-service machines there to get a report.  

Everyone is also entitled to one free SCHUFA data copy per year. However, this document contains various information that is not suitable for the landlord, does not have a forgery-proof certificate, and can sometimes take several weeks. 

Your Schufa is a very important document that carries a lot of weight when it comes to renting or buying a property in Germany. So make sure to keep it as clean as possible from the start. 

Why do you need a Schufa document? 

As mentioned earlier, you will most likely be asked to submit your Schufa to your future landlord. The report assesses your financial stability and tells the landlord whether or not you are a reliable payer. The final score you receive represents the statistical likelihood that you will meet your payment obligations and is calculated based on past experience. SCHUFA is consulted for almost every financial long-term contract you enter into in Germany: when you sign a contract with a cell phone or Internet provider, apply for a loan or mortgage, etc.

When and where do you need a SCHUFA credit report?

Most often, a SCHUFA credit check is considered when you need to prove that you can pay your bills. 

– Generally, any purchase that is paid in installments almost always requires a SCHUFA credit check in Germany. 

– Another common reason is renting an apartment or house in Germany. It is rather rare for a landlord to rent an apartment without a SCHUFA certificate. 

– If you want to take out a consumer or business loan in Germany, your bank will check your SCHUFA score. 

– In some cases, you may need a credit check to sign a long-term contract, such as a cell phone, internet, or insurance contract. Often, however, the contracting parties will then take care of this with your consent.

Important to know

A score above 95 is considered very good. The Schufa score does not depend on your income, but only on your behavior! 

For foreigners, the issuance of a SCHUFA report is usually only possible if you have already lived in Germany for some time and have a German bank account. If this is not the case, you may need other proof of your financial reliability. This can be, for example, a reference letter from your current bank or a voluntary guarantee from a third person, e.g. a relative in Germany. 

SCHUFA will continue to collect information about you even after you leave Germany. So make sure that you do not leave any outstanding payments. Always try to have a good Schufa score. Perhaps your future goals will require you to prove you have a positive credit rating.

What does your SCHUFA score mean?

SCHUFA uses different scoring methods that are individually distributed to different categories. There are two types of SCHUFA scores: base scores and industry scores. 

What is the basic score

The SCHUFA basic score is a general scoring. You can obtain this score by requesting a SCHUFA self-report, as explained in the section above. 

The base score indicates the likelihood of reliable payment by you. A high score indicates a low risk of default. For example, if you have a SCHUFA score above 97.5, you belong to the group with the lowest risk of default. 

What is the industry score

SCHUFA industry scores can also be found in your self-report. These scores are specifically tailored to different industries, such as the SCHUFA score for online mail-order companies or banks, etc. If you sign a long-term telephone contract, for example, your score in the telecommunications industry is decisive. Industry scores are calculated differently depending on the industry. Subsequently, these scores are divided into rating classes, just like the basic score. 

What data is collected by SCHUFA in Germany?

Personal data: Your full name, address, previous addresses, and dates of birth. 

Financial data: Existing bank accounts, existing installment payments, current or concluded loans, leasing contracts for vehicles, guarantees, contracts from the mobile phone or telecommunications industry, various insurance contracts and contracts with energy suppliers, etc. 

And of course, SCHUFA also collects the history of your unpaid bills, fines, and dunning notices. From all this information, your SCHUFA score is calculated, which is then noted on the certificate. 

How often is the SCHUFA score updated? 

Your SCHUFA credit score is updated every three months. If you would like to check your current score, you can order the free SCHUFA data copy once a year. 

What can cause the SCHUFA score to deteriorate?

Your SCHUFA score can drop for a number of reasons. For example: 

– Unpaid bills 

– Late payments 

– Overdrawn accounts 

– Dunning notices 

– Insolvencies 

– Many credit cards or checking accounts 

However, other factors can also influence your SCHUFA credit score in Germany, such as: 

Age: Older people are more likely to be considered creditworthy. For lenders and banks, people around 50 are most attractive as customers because they are considered more financially stable than younger people. 

Frequent financing: frequent installment payments for typical household or retail purchases can hurt your SCHUFA score in the long run, such as financing household electronics at MediaMarkt or Saturn, clothing at Zalando or H&M, or household purchases at Amazon. You should avoid this if possible. 

How can you improve your SCHUFA score?

Usually, you can’t improve your SCHUFA score overnight. But if you act in a trustworthy and reliable manner, your Schufa score will also improve:¬†

– Always pay your bills on time. 

– Cancel all unused checking accounts and credit cards. 

– Check the entries in your credit report to make sure they are correct. 

– Always pay installment payments of any kind on time. 

– Make sure you have a good balance between income and expenses. 

– Always keep an eye on your SCHUFA score. Especially if you plan to take out a loan in Germany at some point in your life. 

Anyone can run into unexpected financial difficulties. If you find yourself in one, you should contact your creditor as soon as possible and work out a new payment plan. This can also prevent negative SCHUFA entries. 

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