What are the new changes to Germany’s SCHUFA credit score system?

Germany’s leading credit score company, SCHUFA, has changed its method for calculating scores. What is changing, and what does it mean for residents?

SCHUFA launches new scoring system

Anyone who wants to sign a new rental contract, open a bank account, take out a loan, or buy a car on finance in Germany needs an up-to-date credit report to do so. 

For their report, the vast majority of people go to the General Credit Protection Association (Schutzgemeinschaft für allgemeine Kreditsicherung), more commonly known as SCHUFA.

To create credit reports, SCHUFA Holding AG collects data from over 10.000 companies, including banks, credit card companies, mobile phone providers, insurance companies and utility providers.

SCHUFA’s calculation methods have long been criticised for being over-complicated and opaque. As such, from March 16, SCHUFA will employ a new credit score calculation method, which the company says will be “completely transparent”. 

How does the new SCHUFA scoring system work?

Previously, SCHUFA used 250 criteria to calculate people’s credit scores; this will be reduced to just 12 criteria. These 12 new criteria consider the following:

• Your payment defaults
• The age of your oldest bank contract
• The age of your oldest credit card
• The age of your current address
• The age of your most recent credit line (a credit line is a flexible loan)
• The number of inquiries and transactions for current accounts and credit cards in the past 12 months
• Number of inquiries outside the banking sector in the past 12 months
• Instalment loans taken out in the past 12 months
• Longest remaining term of all instalment loans
• Credit status
• Mortgage
• Existence of an identity verification

Until now, anyone who needs a SCHUFA score has had to go to a local bank and request one, or make an online request and wait around three weeks for the document to arrive in the post. A version of the document that included a lot of personal information was free, while an official version (a SCHUFA-Bonitätsauskunft) cost 29,95 euros.

Now, anyone can see a simplified version of their score online for free. In the "data cockpit" on the SCHUFA website, users will be able to see how their score is calculated. In the SCHUFA app, it is also possible to make amendments or add new information. These changes mean it will be easier to find mistakes that might lead to an incorrect, low score, but users will still have to know where to look.

According to a report from Tagesschau, while the new SCHUFA system is more transparent, it is “above all a marketing success for SCHUFA”. It will be a few months or years until we understand whether SCHUFA’s new transparency policy means people are scored more fairly.