Most people have something to do with it at some point when it comes to concluding a rental agreement or taking out a loan: the protection association for general creditworthiness – Schufa for short.For many it is not clear how the Schufa calculates the score. Now the information file has created some transparency and reveals how the score is composed and how it can be improved.
When concluding many contracts that require a longer business relationship, the question of Schufa information often arises. This determines a person’s creditworthiness by using the Schufa score to calculate the probability of a loan default. A successful conclusion of a contract depends on a good score. If you have a bad score, you usually don’t get a rental contract or a high loan for an expensive car. Consumers are therefore dependent on positive information. However, how the Schufa calculates the score exactly remained a secret for a long time. Until now! Because for the first time, Schufa has revealed what information it uses to calculate the score.
Find answers to basic questions about Schufa or how to get free self-assessment according to Art. 15 GDPR in the article: What SCHUFA knows about you – and what not.
The secret of positive Schufa information
A positive Schufa report is given with a score of 90-95 percent. The risk of non-payment is then rated as satisfactory to slightly increased. Score values below 90 percent are judged negative by the information file.
| score value | risk of failure |
|---|---|
| > 97.5% | Very low risk |
| 95%-97.5% | Low to manageable risk |
| 90% – 95% | Satisfactory to increased risk |
| 80% – 90% | Significantly increased to high risk |
| 50% – 80% | Very high risk |
| Very critical risk |
How can I improve my Schufa score?
The Schufa explains that there is a positive score if a debtor pay existing contracts and obligations on timet. Unpaid installments and invoices are passed on to the credit agency. Simple payment reminders do not count. It’s about warnings. Information from a second reminder can be included in the information if there are four weeks between the first and second payment request. In addition, the creditor must inform the credit agency that the default in payment has been reported.
If there is no objection to the claim, the information is entered. If there is a delay in payment, debtors should settle overlooked invoices and installment payments as quickly as possible, which then has a positive effect on the Schufa score.
In addition, the number of Keep loan agreements and payment obligations within manageable limits. Even those who always pay off a large number of loan installments on time bear a higher financial burden, writes the Schufa. It also depends on the volume of the loan, the total monthly load and the term. A rapid score deterioration occurs when several loans are taken out at short intervals from different providers. Be careful when applying for a loan. These requests are stored for 12 months. If a large number of loan requests occur during this period, the Schufa assumes that there will be an increased need for money, which has a negative effect on the score.
A few Loans that a debtor reliably repays over a longer period of time improve the score. A longer credit history is definitely a positive thing, because it shows that you are handling money responsibly.
Consumers should also ask themselves more often whether they really use all their credit cards and current accounts. One A large number of credit cards and checking accounts can have a negative impact on the score. A check of which accounts are available and under which names they run can therefore not hurt. Especially since misuse of an account is considered non-contractual behavior.
Also Read: The Pros and Cons of Zero Percent Financing
What about the Schufa score formula?
However, the formula for calculating the score remains a business secret of Schufa, because the credit agency earns a lot of money from data trading, which is intended to give contractual partners a certain degree of security. Fortunately, they are not allowed to use all of the information. Marital status, religion, nationality and information from social networks are taboo for Schufa. Information about assets and salary also plays no role, because it is about the risk of a possible payment default. Anything else would not be morally justifiable. In times of huge data sets and digital data traces, data protection rules, storage and deletion periods are becoming increasingly important. Even if the accuracy of the scores improves with a lot of information, the collection of data should remain limited.
Sources
- Schufaaccessed 10/07/22.