What does a "Schufa entry" mean for me? The term Schufa generally refers to Schufa Holding AG. The name is an abbreviation of an association founded in 1927, originally called the "Schutzgemeinschaft für allgemeine Kreditsicherung".
This association, originally based in Berlin, was the seed for today's Schufa. In 2000 various regional companies were merged with the federal Schufa and reorganized under a new holding.
Shareholders of this holding, organized as a stock corporation and based in Wiesbaden, Hesse, are lending companies, primarily the banks operating on the German market. With around 750 employees the company generates annual revenue of over 100 million euros; profit in 2009 was 1.9 million euros.
Around 100 million Schufa inquiries per year
As a credit reporting agency, Schufa's main business purpose is to protect customers and contractual partners from loan defaults. Schufa also emphasizes that its services help protect private consumers from potential over-indebtedness.
According to its own data, Schufa holds well over 450 million individual data records for more than 65 million natural persons in Germany. Around three quarters of all Germans are therefore recorded there with at least one Schufa entry.
Year after year Schufa processes more than 100 million creditworthiness inquiries. Only a very small portion of these, about 1.5 million, are self-disclosures in which consumers want to view the data stored about them. Anyone has the right under the Bundesdatenschutzgesetz to such a self-disclosure and to the correction of incorrect data.
It can be requested in writing once a year. A one-time registration fee is charged by Schufa. However, users can also use this Schufa consumer disclosure for other purposes, for example as a proof of creditworthiness when dealing with a landlord.
High market share of Schufa in the banking sector
Schufa's business partners include various customer groups. These are divided into three categories and receive different information:
- A contractual partners (banks, credit card companies and leasing companies): positive and negative features;
- B contractual partners (retail and mail-order companies, telecommunications providers and other firms that offer deliveries and services on credit): negative features; in addition, Schufa provides certain customers with services within the scope of risk management and customer care;
- F contractual partners (collection agencies): address data.
In the banking sector, where banks are classified as A contractual partners, almost all private banks in Germany use Schufa. Among cooperative banks and savings banks, Schufa's market share is between 85 and 90 percent. Consumers who want to apply for a loan at a bank can therefore expect that the bank will make an inquiry to Schufa as part of the loan application review.
Data from a Schufa entry may only be transmitted with consent
As early as 1985, the Bundesgerichtshof issued its still-effective Schufa ruling. It primarily established that customer data may only be transmitted to Schufa if the person concerned agrees to the sending and storage of the data. This Schufa clause still applies today; in practice bank customers encounter it, for example, when opening a new account.
However, Schufa does not only store data that require the consumer's consent. The company also stores information that appears in public directories or official notices, such as the filing of a sworn declaration in the case of a court-ordered enforcement proceeding.
Because these data are public anyway, there are no data protection concerns. What is controversial, however, is whether these data may be digitized without the consent of the person affected.
Positive and negative features: Schufa entries
The data stored are only partially determined by Schufa itself. As a rule, credit institutions or other contractual partners send the data concerning their customers to Schufa. If the customer's consent is given, Schufa stores, in addition to the name, date of birth and current and possibly previous addresses, also data relating to the initiation and handling of business relationships.
If these are handled in accordance with the contract, they are recorded as so-called positive features in Schufa, otherwise negative features are noted. This is the case, for example, when loan installments or invoices are not paid on time or are not paid at all.
The data do not remain in a consumer's Schufa file indefinitely. When outstanding claims are settled or loans are repaid, these data are usually deleted after three years, i.e. at the end of the third calendar year. Claims under an amount of 1000 euros that are reported and settled within one month are also removed from the file immediately.
For data relating to a credit card or checking account or to specific retail or mail-order accounts, the deletion of the data occurs after the respective account is closed.
Schufa entry & score as a decision basis for companies
Schufa's most important service for many contractual partners is the so-called scoring. Based on the individual Schufa entries, each consumer's personal score value is determined. This value ranges between 1 and 100 and indicates the probability that a loan paid out to the consumer will not be repaid.
As a general rule, a lower value corresponds to a higher probability of default. However, the score value also depends on the purpose for which it is calculated. For example, an insurance company receives a different value than a mobile phone provider making an inquiry about the same person.
The calculation of the score value is based on various factors. Among other things, whether the consumer moves frequently or how many bank accounts they have is taken into account. In a self-disclosure consumers can request their base score. This is given as a percentage and is recalculated after three months. The value ranges between zero and 100 percent.
The higher the value, the better the personal score value; however, a value of 100 percent is only theoretically possible. How exactly the score values are calculated is not communicated by Schufa. This lack of transparency in the Schufa entry is one of the biggest criticisms from consumer protection advocates.
Avoiding a Schufa entry with a loan from abroad
As already mentioned above, it is hardly possible in Germany to obtain a loan without the bank making an inquiry to Schufa as part of the application review and without the loan resulting in a Schufa entry. Schufa's information on the applicant's creditworthiness (including Schufa entry) is a major factor in the decision on the application.
Consumers who already have numerous entries in their Schufa file and possibly some negative features that have not yet been removed should therefore expect difficulties obtaining credit because of their Schufa entry. This applies even if, after past financial problems, they are now in a permanent job and can demonstrate a regular monthly income.
In such a case it may be worthwhile for the applicant to inquire about a loan from abroad. In principle Schufa only works with banks that operate on the German market; applying for a loan without a Schufa inquiry is also possible at a bank in Switzerland or another country.
No Schufa entry for loans from abroad
Another advantage of a loan from abroad is the fact that no entry is made at Schufa. If the loan is disbursed, this happens without a notification to the Germany-based Schufa.
In this way your file is not burdened by such an entry. This can be advantageous, for example, if you are considering buying a house and taking out the necessary loans in Germany. If you want to use subsidized loans, this is usually only possible through your local bank, so a loan from abroad without a Schufa entry is then not an option.
However, if you need a loan first for another purpose, you can avoid an entry in your personal Schufa file. In principle such a loan without the aforementioned Schufa entry is available to all professions; when comparing various terms, as a bank customer you should at least take a look at the relevant offers.