Credit rating in Germany

Question

A multitude of questions address the issue of credit ratings and FICO scores in the US and other countries. I am however specifically asking how credit scores (SCHUFA) work in Germany. From various sources I learned that a lot of personal and financial details are included (obviously), e.g. address and address changes, number of accounts, number of credit cards, being late on payments (most obviously) and so on.

Two issues that are discussed here at length with respect to the US that I am unable to verify for Germany are however:

• the ideal credit card utilization
• building a score by borowing (little) money and paying back on time

So the question is: How do credit history and credit card utilization influence credit scores in Germany?

Answer 1

The SCHUFA in Germany works a bit different from the FICO score in the US. My background: I am a German currently living in the US.

The information others want to see from the SCHUFA are a bit different. If you want to example rent a house or an apartment, the landlord often wants to see a SCHUFA statement which only shows that there are no negative entries. This statement you can get easily from online and they don't mention your credit score there.

If you apply for a real credit or want to lease a car, they want to look deeper in your SCHUFA profile. However, very important is: They need signed permission to do this. Every participating company can submit entries to your profile where the score is calculated from. For example mobile phone plans, leasing a car, applying for a loan.

Some lenders decide on the score itself, some on the overall profile and some also take your income into account. Since there is no hire & fire in Germany you are often asked to show your last 3 paychecks. This, in combination with your SCHUFA score is used for determination if you are eligible for a loan or not.

However, they check through every entry which is made there and as long as it is reasonable and fits to your income (car for 800 EUR/month with a 1000 EUR salary does not!) you should not have a problem establishing a good score.

The, in my eyes, unfair part about Schufa is that they take your zip code and your neighborhood into account when calculating their score. Also moving often affects the score negatively.

To finally answer your question: Credit history is also built by mobile phone plans etc. in Germany. As long as you pay everything on time you should be fine. A bad score can definitely hurt you, but it is not as important to have a score as it is in the US because the banks also determine your creditworthiness based on your monthly income and your spending behavior.

Answer 2

The SCHUFA explicitly says on their website that their scoring system is a secret.

However, if your goal is to be credit-worthy for example to get financing for a house or a car or whatever, just pay any loans and your credit card back on time and you'll be fine. There is no need to build a credit history.

I just got a mortgage on a new house without any real credit history. I have one credit card which I only use on vacations because some countries don't take my debit card, and I always put money on it before I use it, so I've technically never borrowed money from a bank at all.

My banker looked at my SCHUFA with me and we saw that there was nothing in there except for the credit card, which has a 500€ limit and if I maxed it out, the monthly interest would be 6,80€ so he added that 6,80€ to my expenses calculation and that was it.

If you're having trouble getting a loan and you don't know why, you can ask the SCHUFA for the data they have on you and you can correct any mistakes they might have made. Sometimes, especially when you have the same full name and birth date as somebody else, the SCHUFA does get things mixed up and you have to sort it out.