If you plan to live or live in Germany, you have probably already heard about SCHUFA – or you will soon. It is one of those things that can feel a bit mysterious at first: Whether you try to rent an apartment, open a bank account, or sign up for a mobile phone contract, your SCHUFA score will often play a role in the process.
That’s why I created this guide. I want to help you understand what SCHUFA is, what information it holds about you, and how it impacts your financial life in Germany.
By the time you finish reading, you will understand SCHUFA, know how to manage your score and access the information stored about you.
This article is part of our Ultimate Guide on Banking and Banks in Germany, giving you all the information you need to manage your expats finances.
What is SCHUFA?
SCHUFA stands for “Schutzgemeinschaft für allgemeine Kreditsicherung”, which translates to “Protection Association for General Credit Security.” Germany’s leading credit bureau collects and manages financial data to evaluate individuals’ creditworthiness.
Unlike some other countries, where multiple credit bureaus compete, SCHUFA dominates the landscape in Germany. Its purpose is simple: Provide lenders, landlords, and service providers with an overview of your financial reliability. In other words, SCHUFA helps these entities determine whether you will likely meet your financial obligations, such as paying your rent, paying loans, or covering your phone bill.
SCHUFA is not a government organization—it is a private company. It collaborates with banks, utility providers, and other businesses to collect data about your financial behavior. While this might initially sound intrusive, it is essential to understand that SCHUFA is not there to spy on you. Instead, it aims to reduce risks for businesses and make financial transactions smoother for everyone involved.
Having a SCHUFA record is almost unavoidable if you plan to stay in Germany long-term. Whether opening a bank account, getting a credit card or applying for a rental apartment, companies will often check your SCHUFA score to assess your financial reliability. With some hints about SCHUFA’s work, I want to help you make the system work in your favor.
Purpose and Function of SCHUFA
SCHUFA plays a crucial role in Germany’s banking system, acting as a bridge of trust between individuals and businesses. Its primary purpose is to assess and communicate your financial reliability, helping companies make informed decisions when offering loans, services, or contracts.
Here is how SCHUFA functions in practical terms:
- Data Collection: SCHUFA collects financial information about individuals from various sources, such as banks, utility companies, and telecommunication providers. It includes data about your bank accounts, credit cards, loans, payment history, and any outstanding debts.
- Creditworthiness Assessment: Using the data it gathers, SCHUFA creates a credit score that reflects your financial behavior. This score helps businesses evaluate the likelihood that you will meet your financial commitments.
- Risk Mitigation for Businesses: By providing access to your SCHUFA score and related information, SCHUFA helps businesses minimize financial risks. For example, a landlord may check your SCHUFA score to ensure you will pay your rent on time. Similarly, banks rely on SCHUFA to decide whether to approve a loan application.
- Facilitating Financial Transactions: While SCHUFA may seem intimidating, it enables smoother financial transactions. For instance, a positive SCHUFA score can speed up your loan approval process or make it easier to secure an apartment.
SCHUFA provides the information businesses use to make their decisions. Therefore, on the one hand, your SCHUFA record can significantly influence how you are perceived financially; on the other hand, different banks still make different decisions based on your Schufa score.
Why SCHUFA is Important in Your Daily Life
Whether you rent an apartment, secure a loan, or sign up for a mobile phone plan, SCHUFA plays a critical role. Having a strong SCHUFA score simplifies many aspects of life in Germany. It opens doors to better financial opportunities, reduces stress, and gives you greater flexibility in managing your finances.
Renting an Apartment
One of the most common situations where SCHUFA is essential is renting a place to live. Landlords and property management companies often request a recent SCHUFA report to prove your financial reliability. A positive SCHUFA score shows them you will likely pay rent on time.
If you are new to Germany and do not yet have a SCHUFA history, you can ask landlords if they accept alternatives such as pay slips or a letter from your employer.
Current Accounts and Credit Cards
While opening savings or investment accounts do not require a SCHUFA check, current accounts (“Girokonto”) with or without overdraft facilities (“Dispokredit”) and credit cards usually do.
It is usually possible to get a current account as long as there are no negative SCHUFA entries. Hence, opening a bank account as a new expat in Germany without a credit history will not be a problem. For credit cards, a credit history is typically required.
Signing Contracts for Services
Service providers, such as mobile phone, internet, and utility companies, often check your SCHUFA score before agreeing to a contract. A good score assures them that you’re unlikely to default on payments.
As long as you do not have a negative SCHUFA entry, service contracts are usually easy to access. They can also help build your credit history.
Everyday Purchases and Payments
Your SCHUFA score can even come into play in less apparent ways. For example, if you look to finance a major purchase, like a car or furniture, the retailer may check your SCHUFA before offering installment payment options.
Always pay any installments for financed purchases on time to prevent negative entries and make yourself known as a reliable debtor.
Applying for Loans and Mortgages
Banks rely heavily on your SCHUFA score when deciding whether to approve loan or mortgage applications. A high score increases your chances of approval and can result in better loan terms, such as lower interest rates.
Before applying for a loan, check your SCHUFA score to ensure it’s in good shape. Address any errors or negative entries beforehand.
What Data Does SCHUFA Collect?
SCHUFA collects a wide range of financial data to evaluate your creditworthiness. Here is an overview of the types of information SCHUFA collects:
Data Collected by SCHUFA
What data is collected?
What does it mean?
When is it deleted?
Personal data
Your master data include the name, date and place of birth, as well as current and previous addresses
Previous addresses at least 3 years
Bank Accounts
SCHUFA records details about your active current accounts and associated overdraft limits, including when they were opened and closed. However, it does not track your account balances or spending habits. Neither savings nor brokerage accounts are registered, as they cannot be in a negative balance.
At account closure
Credit Cards
If you have credit cards, SCHUFA tracks their existence and associated credit limits. Responsible use of credit cards, like paying off balances on time, can positively impact your score.
At account closure
Loans and Credits
Any loans or credit lines you have taken out, such as personal loans, mortgages, or installment payments, are included in your SCHUFA record. The information shows whether you have kept up with repayments or if there are any outstanding balances.
3 years months after repayment
Requests
Any requests from banks and companies initiated, e.g., before issuing new loans, opening a bank account, or granting a new mobile phone contract, are saved in the database.
12 months or less
Negative payment Behavior
One of the most critical pieces of data SCHUFA tracks is your payment history. Late payments, unpaid bills, or debt collection cases can result in negative entries that lower your credit score.
At least 18 months after resolution
Court Records
If there are court-ordered judgments (“Amtsgericht”) against you for unpaid debts, these will also appear in your SCHUFA record.
At least 6 months after resolution
Source: CHECK24, Berliner Morgenpost
What SCHUFA Does Not Collect
SCHUFA does not gather all types of personal data. For example:
- Your income or savings are not part of your SCHUFA report.
- Your spending habits or specific transactions are not tracked.
- It does not record non-financial information like political beliefs, religion, or health data.
- According to a court ruling, SCHUFA shall delete and not keep new data for ongoing contracts such as mobile phoning or broadband.
Right to Access Your Data and Correct Errors
Since the data SCHUFA collects significantly impacts your financial opportunities, errors in the information – such as closed accounts not being updated in the system – can negatively affect your score. If you suspect an error, you can request a correction.
Under the General Data Protection Regulation (GDPR) and German law, you can access the data SCHUFA holds about you. It includes the free annual report (Datenübersicht nach § 34 BDSG), which provides a detailed overview of all stored information.
You can request corrections if you discover incorrect or outdated information (e.g., address or account data) in your SCHUFA report.
How Does the SCHUFA Score Work?
Your credit score is at the heart of SCHUFA’s system – a number that reflects your financial reliability. This score significantly determines your ability to rent apartments, secure loans, or sign mobile phone and broadband internet contracts.
Your SCHUFA score is calculated based on the data SCHUFA collects about your financial history. This score is a percentage, with higher percentages indicating greater financial reliability. Here is a general breakdown:
Overview: Credit Card Acceptance in Germany
SCHUFA Score
Risk of Default
>97.5
Very low risk
95-97.5
Low to moderate risk
90-95
Moderate to elevated risk
80-90
Elevated to high risk
50-80
Very high risk
<50
Critical risk
Source: advocado
Your SCHUFA score is not static and can change based on your financial behavior. Positive actions – like paying bills on time – can improve your score, while negative actions – like defaulting on payments – can lower it.
Several factors influence your SCHUFA score, including:
- Payment History: Timely payments have a positive impact, while late payments or defaults result in negative entries.
- Credit Utilization: Using a small portion of your available credit (e.g., on credit cards or overdraft accounts) can boost your score. High utilization, on the other hand, may lower it.
- Number of Credit Accounts: Having multiple active loans or credit accounts may reduce your score, as it suggests higher financial risk.
- Frequency of Credit Inquiries: Frequent credit checks (e.g., for loans or credit cards) within a short period can negatively affect your score. However, personal inquiries to view your SCHUFA report do not impact your score.
- Negative Entries: Court judgments, unpaid debts, or collection agency actions significantly negatively affect your score.
How to Build and Improve Your SCHUFA Score as an Expat
If you are new to Germany, one of the biggest hurdles is that you likely do not have a SCHUFA score yet. Unlike locals who often have an established SCHUFA history, expats must build their credit record from scratch.
It can make securing housing or signing contracts more challenging. However, you can actively work to build and improve your SCHUFA score even though it does not happen overnight. This way, you can not only open doors to better opportunities but also help avoid unnecessary stress when applying for loans, contracts, or housing. Here are a few practical tips:
Register as a Citizen of Germany
Visit your local authority and register a residence in Germany (“Anmeldung”). It enables you to identify with financial institutions and service providers and perform relevant activities.
Open a Bank Account
Sign Smaller Contracts
Pay Bills on Time
Obtain Overdraft with Your Bank
Apply for a Credit Card
Close Unused Accounts
Avoid Unnecessary Credit Applications
Avoid Frequent Changes in Address
Avoid Negative Entries
Regularly Check Your SCHUFA Report
My ultimate tip is to not stress but to be responsible with your finances to keep a clean SCHUFA record: Pay your bills on time, limit credit applications, and check your report regularly.
How to Obtain Your SCHUFA Report
When you open a bank account, apply for a mortgage, or sign up with a utilities company, you usually do not have to provide a SCHUFA record. The bank or business automatically requests your SCHUFA score based on the data you provided to them. However, there are two significant instances for which you need a SCHUFA report:
- You want to check your score and verify the data saved about you.
- You must provide a SCHUFA to certify your creditworthiness (e.g., to your landlord when you want to rent a new apartment).
Verifying Your Score and Data: Free Annual Report “Datenübersicht nach § 34 BDSG”
Errors in your SCHUFA record can occur, so I recommend reviewing it regularly to ensure accuracy and avoid being disadvantaged.
If you are new to Germany, requesting a report to understand where you stand and what steps you need to take to build your credit history is worthwhile. Seeing your score can help you understand your chances of success when applying for a credit card or loan.
Under German law, you are entitled to one free SCHUFA report yearly. This report, known as the Datenübersicht nach “§ 34 BDSG”, provides an overview of the data SCHUFA has collected about you. Here is how to request your free annual report:
- Visit the SCHUFA Website: Go to the official SCHUFA website and navigate to the section for the free report.
- Fill Out the Request Form: Complete the online form with your details, such as name, address, and date of birth.
- Provide Identification: Attach a copy of your ID or passport to verify your identity.
- Submit Your Request: Send the completed form and identification documents by post to the SCHUFA address on their website.
After submitting your request, you will receive your report by mail within a few days.
Remember that the free report is not the same as the paid “Bonitätsauskunft,” which is often required by landlords.
Certify Your Creditworthiness: “SCHUFA Bonitätsauskunft” or “meineSCHUFA kompakt”
If you need your SCHUFA report urgently or for specific purposes – like applying for an apartment rental – you need to purchase a paid version known as the “Bonitätsauskunft.” This version includes a more user-friendly summary of your credit score and restricts the amount of shared data. It is widely accepted by landlords and other entities. You can obtain a paid report in two ways:
- One-time purchase of the “Bonitätsauskunft”
- Create an account on the SCHUFA website.
- Select the option for the “Bonitätsauskunft” and pay the required fee of 29.95 Euros.
- Download or print the report instantly.
- Yearly subscription entitles you to unlimited downloads of the “Bonitätsauskunft” to check your score data in real-time:
- Create an account on the SCHUFA website.
- Select the option for the “meineSCHUFA kompakt” for 4.95 Euros monthly
- Check your score online. Download or print the report instantly.
Alternatively, you can get a SCHUFA “Bonitätsauskunft” at a Postbank branch. It also costs 29.95 Euros and you are required to bring your ID or passport and your registration certificate (“Meldebescheinigung”).
Final Thoughts on SCHUFA and Credit Scoring in Germany
SCHUFA influences many aspects of your financial life, from renting an apartment and subscribing to a mobile phone contract to accessing bank accounts. As a resident in Germany, you have the right to access, correct, and monitor your SCHUFA data so that you do not have to expect negative consequences.
However, expats just arriving in the country and lacking a credit history can face unique challenges. Hence, it is crucial to proactively and patiently undertake the necessary steps to shape a SCHUFA record.
But as soon as you pay bills on time, limit unnecessary credit inquiries, and manage accounts responsibly, your score will take care of itself over time. Then SCHUFA can work in your favor, allowing you to be perceived as a reliable customer by businesses all over Germany.
Do You Want to Know More About Banking in Germany?
Our Ultimate Guide summarizes everything you need to know to manage your German finances.
