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What is SCHUFA? Understanding credit score in Germany

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The Schufa credit check and its importance in real estate financing

When applying for a loan from a bank or credit institution, it is customary to carry out a credit check in Germany. In this process, the applicant and his or her financial circumstances and payment history are closely examined with the help of a Schufa credit check. In this way, the lender ensures that the applicant is able to fulfill the financial obligation of loan repayment in the long term. In rare cases, it is also possible to obtain a loan without a credit check and Schufa, but this is the exception.

Definition of creditworthiness

The term creditworthiness, also known as credit standing, is used to assess whether a person is able to make payments. Two criteria are taken into account here: personal creditworthiness and economic creditworthiness. The personal factor concerns a person's willingness to pay and reliability. Significant aspects included in the assessment of the personal creditworthiness are the punctuality and full performance of payments as well as possible payment difficulties or delays. Economic creditworthiness primarily concerns the financial ability to make payments. Here, the focus is on the asset situation, income and expenses as well as forecasts for the future. Banks and credit institutions examine all these criteria closely in order to minimize the risk of default. This is usually done at the Schutzgemeinschaft für allgemeine Kreditsicherung, or Schufa for short.

Credit score criteria

As part of the credit check in Germany, the bank examines the personal and economic creditworthiness. The monthly income, the necessary expenses for rent or other loans, possibly further debts and the assets, which may include savings accounts, securities or unencumbered real estate, are considered. For personal creditworthiness, the assessment of the security of employment is important. Previous payment behavior is also examined, such as whether there have already been dunning procedures.

Unpaid loans or bankruptcy proceedings have a negative impact. (Image rights: SCHUFA Holding AG)

What the score value at Schufa means

As part of the Schufa credit check, the borrower is examined and the result is the so-called credit score. The higher this creditworthiness score, the more creditworthy the person is classified. Influencing factors include information on bank accounts, credit cards and loans, existing guarantees, accounts with mail-order companies or current leasing and cell phone contracts. Credit installments that have not been paid or insolvency proceedings have a negative impact on the score. Age and place of residence are also taken into account in the assessment. All these factors enable Schufa to make a projection with regard to the probability of default on a loan taken out. Not only banks can request a credit check from Schufa, it is also possible for each individual to check their own creditworthiness immediately.

Negative Schufa score and its effects

Taking out a loan without a credit check and Schufa is possible in principle, although rare. There are several credit institutions that grant an instant loan without credit rating. However, it is important to ensure that the conditions are communicated transparently and all costs are clearly itemized. To obtain a loan from a bank without Schufa, certain requirements must be met. This is the case, for example, if sufficient equity is contributed to the financing. An above-average household income can also be helpful in this case. Exclusion criteria for a loan without Schufa, on the other hand, are an existing consumer insolvency or an affidavit.

Frequently Asked Questions

Written by:

Stefanie Aust, Guest Writer

Stefanie loves to put complex topics from the real estate world into understandable and inspiring words. Whether it's about the right financing, choosing the right type of flat, or a successful property search: Stefanie is happy to inform you.

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