How You Can Unknowingly Fall into the SCHUFA Scoring Trap and How to Get Out of It.
When the name „SCHUFA“ comes up in casual discussions, even the most jovial participants often fall silent for a moment. SCHUFA Holding AG (also known as the General Credit Protection Agency) has a poor reputation among the public, and the wildest rumors circulate about its methods. None of them are entirely true, yet Mr. Miller from next door often has no idea what data the credit bureau receives, how it is processed, and to whom it is ultimately passed on.
SCHUFA’s Scoring Information Service (SIS)
In recent years, SCHUFA has introduced a particularly enigmatic service: the Scoring Information Service (SIS). Based on credit-related factors such as „customer since,“ „residence,“ „profession,“ „securities,“ and even „age,“ points are awarded, weighted, and then summarized into a credit rating. The lower the score (from the English „to score“ – to assign points, „score“ – evaluation), the poorer the creditworthiness, and the higher the risk of default. This overall score is intended to facilitate lending decisions. If creditworthiness is sufficient, a loan can be granted.
This service is mysterious because SCHUFA does not disclose how the scoring process works in detail. The company keeps the exact calculation formula of its scoring system secret and has consistently refused to reveal it, arguing that the method of score calculation is a trade secret, and the company is in competition with other providers.
Data Used for SCHUFA Scoring Is Not Always Accurate
However, whether SCHUFA’s assessments and point allocations are always correct and appropriate is open to debate. Often, customers are denied loans or mobile contracts because their SCHUFA score indicates insufficient creditworthiness, even in cases where they believe they are not at fault.
For instance, if Mr. Miller fails to pay a bill from a mail-order company, it could be because the item he ordered arrived broken, and he decided to exercise his warranty rights. According to SCHUFA’s system rules, the mail-order company is obligated to report at least the note „claim disputed“ to SCHUFA Holding AG. However, in practice, such notifications are often omitted. As a result, the database records a balance for a highly contested claim, even though there has been no legal ruling on the matter.
Another example: Failing to repay a loan could indeed indicate that Mr. Miller is unwilling to pay, but it could also result from various other circumstances, such as disputes over the loan’s due date. Suppose a bank calls in a loan of €80,000 that Mr. Miller used to finance a property. Mr. Miller disputes the sudden loan termination. Nevertheless, the balance is reported as an outstanding claim to SCHUFA Holding AG. Mr. Miller is now placed on the „SCHUFA pillory.“ This can lead to significant issues, as future mobile contracts or loan applications may be rejected because of this irritating database entry. The result: Mr. Miller is denied a mobile contract or the hoped-for loan, leaving him puzzled.
Experts Recommend Regular Checks of Your SCHUFA Data
So, how can Mr. Miller be helped?
There is nothing inherently wrong with the scoring system or the existence of such databases. The issue lies in how these databases and scoring systems are managed. The score, measured on a scale from 0 (worst) to 1,000 (best), is intended to characterize the average risk of individuals with a similar data profile. It is supplemented by a percentage indicating the probability of a disruption among customers with this profile. The scoring system itself is purely statistical. Its origins can be traced back to the United States, where it was already in use before World War I. However, the scoring system can only function correctly if the data influencing the score is accurate. Collecting „correct data“ means that the claim must also be legally enforceable against the contractual partner. Unfortunately, given the database size of about 65 million recorded individuals, data errors are not uncommon.
To have negative entries removed, an appeal can be made to the entity that submitted the negative entry. If a negative entry does not meet data protection standards, this appeal can also be enforced through legal action.
In general, seeking professional assistance is advisable, as the case law on credit scoring is constantly evolving. For example, on July 30, 2008, the German Federal Cabinet approved a draft law to amend the Federal Data Protection Act (BDSG). According to this draft, the activities of credit bureaus should become more transparent. Affected individuals will be entitled to access information explaining how their score was calculated.
This is a crucial prerequisite for being able to challenge unjustified score values.
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