What does a "Schufa entry" mean for me? The term Schufa generally refers to Schufa Holding AG. The name is an abbreviation of the name of an association founded as early as 1927, then still under the name "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 the umbrella of a new holding.
Shareholders of this holding organized as a stock corporation with headquarters in Wiesbaden, Hesse, are credit-granting companies, i.e. primarily the banks operating on the German market. With around 750 employees the company generates annual revenues of over 100 million euros; profit in 2009 was 1.9 million euros.
Around 100 million Schufa inquiries per year
As a business credit agency, Schufa’s most important purpose is to protect customers and contractual partners from loan defaults. Schufa also emphasizes that its services help protect private consumers from possible over-indebtedness.
According to its own information, Schufa holds well over 450 million individual data items on 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 part of these, about 1.5 million, are consumer self-disclosures where consumers want to view the data stored about them. Consumers are entitled to such a consumer disclosure and to correction of incorrect data according to the Bundesdatenschutzgesetz.
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 proof of creditworthiness when dealing with a landlord.
High market share of Schufa in the banking sector
Schufa’s business partners include different customer groups. These are divided into three different categories and receive different kinds of information:
- A contract partners (banks, credit card companies and leasing companies): positive and negative indicators;
- B contract partners (retail and mail-order companies, telecommunications providers and other firms that supply goods or services on credit): negative indicators; Schufa also offers certain customers services for risk management and customer support;
- F contract partners (debt collection agencies): address data.
In the banking sector, which is classified as A contract 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 from a bank can therefore expect that the bank will make an inquiry to Schufa as part of the credit application review.
Data from a Schufa entry may only be transmitted with consent
As early as 1985 the Federal Court of Justice issued its still-effective Schufa ruling. It established above all that customer data may only be transmitted to Schufa if the person concerned agrees to the transmission 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 consent of the respective consumer. The company also stores information that appears, for example, in public registers or official announcements. This includes, for instance, the filing of a sworn statement (eidesstattliche Versicherung) in the case of court-ordered enforcement.
Because these data are public anyway, there are no data protection concerns about their inclusion. What is controversial, however, is whether these data may be digitized without the consent of the person affected.
Positive and negative indicators: Schufa entries
The stored data are not determined by Schufa alone. As a rule, credit institutions or other contractual partners send the data that concern their customers to Schufa. If the customer’s consent is given, Schufa stores, in addition to name, date of birth and current as well as any former addresses, data relating to the initiation and handling of business relationships.
If these are handled according to the contract, they are entered in Schufa as so-called positive indicators; otherwise negative indicators are recorded. This is the case, for example, when loan installments or invoices are not paid on time or 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 generally deleted after three years or at the end of the third calendar year. Claims under an amount of €1,000 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
The most important service Schufa provides to many contractual partners is the so-called Scoring. Based on the individual Schufa entries, a personal score value is calculated for each consumer. 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 means a higher probability of default. However, the score value also depends on the purpose for which it is calculated. An insurance company, for example, receives a different value than a mobile phone provider that submits an inquiry for the same person.
The calculation of the score value is based on various factors. Among other things, it takes into account whether the consumer moves frequently or how many bank accounts they hold. In a consumer self-disclosure, consumers can request their base score. This is given as a percentage and recalculated after three months. The value is between zero and 100 percent.
The higher the value, the better the personal score, although 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 main criticisms of consumer protection advocates.
Avoid a Schufa entry with a loan from abroad
As mentioned above, it is almost impossible in Germany to obtain a loan without the bank making an inquiry to Schufa as part of the application review and without the loan being associated with a Schufa entry. Schufa’s information on the applicant’s creditworthiness (including the Schufa entry) is an important factor in the decision on the application.
Consumers who already have numerous entries in their Schufa file and possibly even some negative indicators that have not yet been removed should therefore expect difficulties when applying for credit because of their Schufa entry. This applies even if, after financial problems in the past, they are now in permanent employment and can prove a regular monthly income.
In such a case it can be worthwhile for the applicant to inquire about a loan from abroad. In principle, Schufa works only with banks active on the German market; a loan without an entry in Schufa is an option:
If a consumer wants to avoid an inquiry at Schufa in any case, they can also apply for a loan without a Schufa inquiry 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 in Schufa occurs. If the loan is paid out, this is done 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 thinking of buying a house and need to take out the necessary loans in Germany. If you want to use subsidized loans (Förderkredite), this is usually only possible through your house bank, so a loan from abroad without a Schufa entry is not an option in that case.
However, if you first need a loan for another purpose, you can avoid the entry in your personal Schufa file. In principle, such a loan without the said Schufa entry is available to people in all professions; when comparing different terms, as a bank customer you should at least take a look at the corresponding offers.