Credit Checks in Germany: Your Guide to Improving Your Creditworthiness (2024)

Are you trying to rent your dream apartment or thinking about taking out a loan? No matter the reason, if you’re living in Germany, you’ll have to get familiar with your Schufa credit score at some point. But don’t fret—in this guide, we’ll explain how you can request your Schufa report and how to interpret the different credit score values. And if your Schufa credit score isn’t in great shape, don’t worry—we’ll give you a number of tips to boost your creditworthiness. All set? Let’s get started.

Creditworthiness and Schufa—the basics

What does creditworthiness mean?

In simple terms, your creditworthiness is an assessment of your ability to repay a loan. Let’s say you’re applying for a home loan. Your bank will want to make sure you’re able to pay it back in full, plus interest, without defaulting. For this, they’ll need to assess your creditworthiness by checking the data available on you to determine whether you present a financial liability. A low credit score, for instance, constitutes a higher risk of defaulting on a loan.

So, what’s Schufa got to do with all this?

Schufa Holding AG is Germany’s largest credit protection agency. They rate your creditworthiness according to data they’ve collected on you, such as your payment history. This information is passed on to them by companies belonging to the credit protection network. With this data in hand, Schufa checks your reliability regarding past payments or loans in order to assess your creditworthiness for future contracts. In addition to loan applications, you’ll also likely need to submit your Schufa score when you’re applying for a flat to demonstrate that you have a history of making your payments on time.

What’s the Schufa credit score?

Once Schufa has your data, they issue a credit score. This helps banks, landlords, and other parties determine your creditworthiness. However, it’s worth noting that there are several types of Schufa reports. One is the Schufa industry score, which reflects the probability of you meeting financial obligations within a particular branch or industry. The Schufa benchmark score provides information on your creditworthiness and is calculated on the same day as your credit report request. The values lie between 100 and 600 and are determined by calculating the weighted average of all Schufa industry scores. The lower the score, the lower your risk of default. If you have a value of 126, for example, you’re considered very likely to meet your financial obligations.

However, the most popular credit score is the basic Schufa score. This is displayed in a copy of your personal data (according to Art. 15 GDPR), which you can request from Schufa. The figure is shown as a percentage and is calculated quarterly whether you request it or not.

How to boost your Schufa credit score

Has your overdraft request been rejected? This might indicate that your Schufa score has taken a dive. Luckily, you can now take a few steps to boost your credit score in the long-term.

First, check all the data Schufa has saved on your behalf. If you see something that looks out of place, you can request that Schufa amend it.
Do you regularly order from the same company? Create an overview of your outstanding invoices so that you can pay on time and avoid any late fees.
Have outstanding installment loans or other type of loan? Same rule—make sure to always make your payments on time.
If you’ve fallen into the red last month and had to use your overdraft, believe us—we’ve all been there, too. However, try to avoid going into overdraw too often—or if you can manage, don’t use it at all.
Try to keep a document with all your finances and recurring payments, and make sure your expenses don’t exceed your income. If you find it hard to stick to budget, you might want to try easy budgeting methods like the 50/30/20 rule.

Your money at N26

As your mobile bank, our goal at N26 is to make life easier for you—especially when it comes to your finances. Open the bank account that suits you best in minutes—no waiting or paperwork required. And now, you can discover N26 Flex, the bank account for those who don’t meet the Schufa requirements for opening a checking account in Germany.Discover how to switch banks with our tool to facilitate the process.

Frequently asked questions

How do German banks assess creditworthiness?

Schufa is Germany’s largest credit protection agency and is almost always consulted for credit checks. They pull data on your past payments or outstanding loans to create an assessment of how likely you are to default on a loan or contract. On top of that, banks can create an internal ranking based on other crucial information such as your occupation and whether you own any property.

What is a good Schufa credit score?

With the basic Schufa score, your rule of thumb is “the higher the percentage, the better.” 100% corresponds to perfect creditworthiness, while 90-95% already suggests a minor to manageable default risk.

How quickly does the Schufa credit score improve?

This depends on your personal Schufa score and how old the entries are. If you paid off a loan early and this information was collected by Schufa, it might prove helpful in improving your score. Outside of that, simply follow our tips in this guide to improve your Schufa credit score in the long-term.

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Creditworthiness and Schufa - the basics

Creditworthiness refers to an assessment of an individual's ability to repay a loan. When applying for a loan, banks and financial institutions evaluate your creditworthiness to determine the risk of default. In Germany, the Schufa Holding AG is the largest credit protection agency that assesses creditworthiness based on data collected from various sources, such as payment history.

Schufa Credit Score

After collecting your data, Schufa issues a credit score that helps banks, landlords, and other parties assess your creditworthiness. There are different types of Schufa reports, including the Schufa industry score, the Schufa benchmark score, and the basic Schufa score.

The Schufa industry score reflects the probability of meeting financial obligations within a specific branch or industry.
The Schufa benchmark score provides information on overall creditworthiness and is calculated on the same day as the credit report request.
The basic Schufa score is displayed as a percentage and can be requested from Schufa. A higher percentage indicates better creditworthiness.

The basic Schufa score is categorized into different ranges, each indicating a level of default risk:

> 97.5%: Very low default risk.
95-97.5%: Low to negligible default risk.
90-95%: Satisfactory to elevated risk.
80-90%: Fairly elevated to high default risk.
50-80%: Very high default risk.
< 50%: Critical default risk.

Boosting Your Schufa Credit Score

If your Schufa credit score is not in great shape, there are several steps you can take to improve it in the long term:

Check your Schufa data: Request a copy of your personal data from Schufa and review it for any errors or discrepancies. If you find any inaccuracies, you can request that Schufa amend them.
Pay your bills on time: Create an overview of your outstanding invoices and make sure to pay them on time to avoid late fees. This demonstrates a history of responsible payment behavior.
Make timely loan payments: If you have installment loans or other types of loans, ensure that you always make your payments on time. Consistent and punctual payments contribute to a positive credit history.
Minimize overdraft usage: Try to avoid going into overdraft too often or, if possible, avoid using it altogether. Overusing overdraft can negatively impact your credit score.
Maintain a balanced budget: Keep track of your finances and recurring payments to ensure that your expenses do not exceed your income. Consider using budgeting methods like the 50/30/20 rule to manage your finances effectively.

These steps, when followed consistently, can help improve your Schufa credit score over time.

I hope this information helps you understand the basics of creditworthiness, the Schufa credit score, and how to improve it. If you have any further questions, feel free to ask!