Deletion of old data can lead to an improvement in the score – This restores economic capacity to act and creditworthiness.
Once again, a young man contacted the law firm of Dr. Schulte and his team because after checking his own SCHUFA report, he discovered that his score was in the basement. This was initially confusing for him, as he did not find any negative characteristics in his SCHUFA report.
After careful consideration of how to proceed, he decided to hire the law firm Dr. Schulte & Partner. The firm asked SCHUFA to review the SCHUFA report and explain the calculation of the score. The existing contractual relationships were then reviewed for accuracy because even the trained eye of the attorneys could not detect any negative features.
In fact, the review by SCHUFA Holding AG revealed that a contractual relationship was stored in the report that no longer existed at that time. However, only current contractual relationships or those terminated within the last three years may be listed in the SCHUFA report. This is clearly regulated in the Federal Data Protection Act (BDSG). Therefore, Schufa deleted the corresponding entry and sent a new Schufa self-disclosure.
The person concerned was now able to enjoy an improved score. His current score is back above 90%. This once again confirms that you should not believe everything you find in your own SCHUFA report. It is therefore strongly advised that everyone check their SCHUFA information for accuracy. If there are incorrect or outdated entries that Schufa does not want to delete, a law firm with expertise in Schufa matters should be consulted.
The lawyer Dr. Thomas Schulte and team see it the same way:
„The way SCHUFA Holding AG operates is sometimes very questionable. Practice shows that there are often entries of characteristics that should not have been entered under any circumstances or that should have been deleted long ago. You have to tackle this problem of incorrectly stored data. Despite the decision of the Federal Court of Justice that SCHUFA Holding AG does not have to disclose its mathematical procedure for calculating the score, it can be seen that the score deteriorates considerably with the number of existing or registered contractual relationships. To avoid possible difficulties in future contracts, you should always keep an eye on your SCHUFA information. If any of the entries are incorrect, you should have the facts checked by a specialist lawyer and allow them to determine how to proceed. Only in this way can you be sure that, if you want to build a house, for example, you will be able to get a corresponding loan from your bank.“
Update 2025: Schufa scoring – secrets, challenges and the fight for transparency
On algorithms and consumer protection: What is behind Schufa scoring and how consumers can enforce their rights
By Valentin Schulte, economist B.Sc., stud. jur., law firm Dr. Thomas Schulte, Berlin
What is scoring? A detailed definition
Scoring refers to a mathematical method for calculating probability values that are intended to predict the future behavior of a person or a company. In the context of the Schufa, it is primarily concerned with assessing the creditworthiness of consumers. The Schufa score not only affects creditworthiness, but also housing and rental options, making it crucial for both residents and emigrants in Germany.
Schufa scoring is based on statistical models that evaluate a wide range of information. This data is weighted and summarized in a score that indicates the probability that a person will meet their financial obligations.
The score is displayed on a scale. A high value indicates a high probability of payment and thus a good credit rating. A low value, on the other hand, indicates a higher risk. Creditors such as banks, landlords or mobile phone providers use this value to make decisions about contracts, loans or other services.
The aim of scoring according to § 31 Abs. 1 BDSG is to create an objective basis for economic decisions. However, the exact calculation method remains secret and is protected as a Schufa trade secret. This regularly attracts criticism because consumers are not given any transparency regarding the reasons for their assessment.
Example of the definition of scoring
A practical example of scoring is the estimation of the creditworthiness of a consumer who wants to apply for a loan to buy a house. Let’s say that Ms. Meier submits a loan application to her bank. The bank then checks her credit rating by accessing her Schufa score. This score, which ranges from 0 to 100, indicates to the bank how likely it is that Ms. Meier will pay her monthly loan installments on time.
This value is based on various data points reported by Schufa’s contractual partners. For example, information about Ms. Meier’s existing loans, her payment history with past obligations, and the duration of her business relationship with her bank are included in the calculation.
If the calculation results in a high score, this signals to the bank that Ms. Meier has a low risk of default and that the loan will most likely be approved. If the score is low, however, the bank classifies Ms. Meier as a risk, which can either lead to higher interest rates or to the loan being rejected.
This example illustrates how scoring is used as a data-based tool for decision-making – and why the accuracy and transparency of the assessment are so crucial for consumers.
Why a score of 100% is not possible
A Schufa score of 100% would theoretically be the perfect credit rating, with no risk at all that a person would not meet their payment obligations. However, such a score is not possible in practice because scoring systems are always based on probabilities and can never guarantee absolute certainty.
The reasons for this lie in the nature of scoring and the underlying statistical models:
- The future remains unpredictable
The score is a prediction based on previous financial history. Even with a flawless payment history, no one can predict with absolute certainty that a person will always pay reliably in the future. Unforeseeable events such as unemployment, illness or other financial burdens can affect payment behavior. - Systemic risks
A score not only takes into account an individual’s ability to pay, but also external factors such as economic developments. Even the most financially stable person can be affected by economic crises or unforeseen market developments. Such systemic risks make 100% certainty impossible. - Model uncertaintiesThe mathematical models behind Schufa scoring are always subject to uncertainties. They are based on historical data and assumptions about future behavior. However, these models cannot take into account all possible scenarios, which is why they always work with a small residual risk.
- Schufa’s principle of prudence
Schufa and other credit bureaus deliberately calculate with a safety margin. Even with excellent creditworthiness, a score will always remain slightly below the theoretical maximum rating in order to price in possible risks.
In practice, a Schufa score of over 97% is considered excellent. Scores in this range mean that the risk of non-payment is extremely low. However, a score of 100% would be equivalent to assuming that there is absolutely no risk – an assumption that is not tenable in the real world.
How does Schufa scoring work?
Schufa scoring is based on a wide range of personal data that is transmitted by contractual partners such as banks, mobile phone providers or leasing companies. The most important data sources include existing loans, payment defaults, the frequency of credit inquiries and contract information about rental or mobile phone contracts.
This data is processed by an algorithm that calculates a score based on the available information. Each factor is weighted differently, but this is not disclosed.
A key criticism of Schufa scoring is the lack of transparency. The exact way in which the algorithm works remains secret, which means that consumers have no way of understanding the logic behind their rating. In 2014, the Federal Court of Justice ruled that Schufa does not have to disclose its scoring formula as long as consumers can understand the results. Nevertheless, the question remains as to how comprehensible a result can be if the basis for the calculation remains unknown.
Data protection framework for Schufa scoring
Schufa’s processing of personal data is subject to the strict requirements of the General Data Protection Regulation (GDPR) and the German Federal Data Protection Act (BDSG). According to Art. 6 (1) (f) GDPR, processing is lawful if it is necessary to safeguard legitimate interests and the rights of the data subject do not override those interests.
In addition, Section 31 (2) of the German Federal Data Protection Act (BDSG) stipulates that negative entries may only be reported to Schufa under certain conditions. For example, a claim may only be reported if the debtor has been reminded at least twice, the claim is undisputed and at least four weeks have passed between the last reminder and the report.
These legal regulations are intended to ensure that only correct and lawful data is included in the scoring. Nevertheless, problems still arise when incorrect or disputed entries end up in the Schufa database.
Rights of consumers in their dealings with Schufa
Consumers have extensive rights to control the processing of their data by Schufa and to defend themselves against incorrect entries.
The right of access under Article 15 of the GDPR and Section 34 of the Federal Data Protection Act (BDSG) allows consumers to request an overview of all the data stored by Schufa once a year free of charge. This information also includes information on the origin of the data and the recipients to whom the data has been passed on.
The right to rectification under Article 16 of the GDPR allows data subjects to have incorrect or incomplete data corrected. A typical example is when a claim that has already been settled continues to be reported as outstanding. Consumers can request the rectification directly from Schufa or the original creditor.
The right to erasure under Art. 17 GDPR and § 31 (2) BDSG applies to data that has been unlawfully processed or is no longer required. This is particularly important in the case of settled claims or residual debt discharges, which must be erased after a certain period. In 2023, the European Court of Justice ruled that entries regarding residual debt discharges must be erased no later than six months after they are granted.
The consequences of incorrect scoring
An incorrect Schufa entry can have serious consequences. In addition to being refused credit, consumers can also encounter obstacles when looking for accommodation or taking out mobile phone contracts.
One example is Mr. Müller, who applies for a loan to buy a car. His application is rejected because there is a Schufa entry about an allegedly unpaid mobile phone bill. Although Mr. Miller has long since paid this, the error remains. Only after weeks and considerable effort is the entry corrected. This case illustrates the importance of consumers knowing and actively exercising their rights.
Automated decisions and the influence of the courts
Article 22 (1) of the GDPR stipulates that automated decisions that have a significant impact on data subjects are only permissible under strict conditions. The European Court of Justice has made it clear that scoring procedures without human review may violate the GDPR. Schufa must therefore ensure that data subjects have the opportunity to request a manual review of their scores.
Calls for more transparency
Consumer protection organizations have long been calling for the disclosure of Schufa’s scoring algorithms. Only in this way can consumers understand why they have received a certain credit rating.
In addition, the practice of storing data for years is increasingly being criticized. Legislative initiatives aim to increase the transparency of scoring procedures and to strengthen consumer rights.
Conclusion
Schufa scoring is a powerful tool that provides lenders with important information for making decisions. However, the lack of transparency and the problems associated with processing incorrect data pose significant challenges for consumers.
The Schufa score not only affects creditworthiness, but also housing and rental options, making it critically important for both residents and expats in Germany. The maximum achievable score is 97.5%, as the last percentage points account for unpredictable life events such as sudden deaths that are beyond one’s control.
Overview of scoring systems in the Western world
Credit scoring systems differ significantly from region to region due to varying financial and regulatory environments. In particular, systems such as Schufa in Germany, FICO in the United States, and the Comprehensive Credit Reporting (CCR) system in Australia serve as benchmarks for understanding these differences.
Schufa scoring
Schufa’s scoring system is multi-faceted, with multiple scores tailored to different industries and specific transactions. There are currently over 50 different models in use. The most well-known score is the Bankscore, which is used primarily by financial institutions. Schufa scores primarily focus on evaluating default risks and ensuring consumer protection against over-indebtedness. However, Schufa has been criticized for the complexity and perceived opacity of the decision-making processes involved in calculating and applying these scores.
FICO score in the United States
By contrast, the FICO score, developed by the Fair Isaac Corporation, is the most widely used scoring model in the United States. The FICO score ranges from 300 to 850 and uses a simpler set of criteria, focusing mainly on payment history, amounts owed, and length of credit history
A higher FICO score indicates a lower risk of default, leading to better borrowing terms and interest rates for borrowers. This model has been in use since 1989 and has been revised many times to improve its predictive accuracy, leading to the development of industry-specific FICO scores.
CCR system in Australia
The Australian CCR system takes a different approach, requiring credit bureaus to share both positive and negative credit information. This system ranges from 0 to 1200, with higher scores indicating a lower risk of default. The CCR framework emphasizes a broader view of a consumer’s creditworthiness, as it incorporates factors such as timely payments and overall credit behavior.
Key difference
One of the key differences between these scoring systems lies in their methodologies and the types of information they take into account. While Schufa uses a variety of industry-specific assessments and models that can result in a complex understanding of creditworthiness, FICO and the CCR system offer a more standardized and transparent scoring method. Furthermore, the legal implications of automated decision-making also differ. The European Court of Justice (ECJ) has ruled that scoring systems such as Schufa’s fall under the rules on automated decision-making due to their significant impact on consumers‘ financial options.
Canada
In Canada, credit scores are provided mainly by two agencies: Equifax and TransUnion. The Canadian system is similar to the US model, using factors such as payment history, age of accounts, and credit use. However, Canadian scores typically range from 300 to 900, as opposed to U.S. scores between 300 and 850. A score of 680 or higher is considered above average and facilitates access to credit with lower interest rates.
The United Kingdom
In the United Kingdom, credit scores are managed by credit reference agencies (CRAs), with Equifax, Experian and Callcredit being the main players. Each CRA uses its own scoring model, resulting in different scores, although similar factors such as payment history, credit use and length of credit history are assessed. UK credit scores typically range from 0 to 999, with higher scores indicating a lower risk of default.
Australia
The Australian credit scoring system is similar to the UK one, with major credit reference agencies such as Equifax, Experian and Ilony (formerly Dun & Bradstreet). Scores in Australia can range from 0 to 1200, and the Comprehensive Credit Reporting (CCR) system requires credit reference agencies to share both positive and negative credit information, thereby increasing the transparency of an individual’s creditworthiness
France
In France, there is no universal credit scoring system. Instead, credit decisions are often based on an individual’s ‚bank score‘, which is calculated by the bank using data from the applicant’s credit report. This model highlights the independence of banks in assessing creditworthiness, as these scores are not shared with other financial institutions
United States
In the United States, a widely recognized credit scoring model is used, developed primarily by FICO, which rates creditworthiness on a scoring scale of 300 to 850. Payment history remains the most important factor influencing these ratings, along with credit utilization, length of payment history, and type of credit accounts. A score of 700 or higher is generally considered good, while scores above 800 are considered excellent.
The inability to achieve a perfect score (with a maximum of 97.5%) raises concerns about the potential discrimination against individuals facing unavoidable life circumstances, such as sudden financial setbacks or health issues.
Finally, the use of a single score may not capture the full financial picture of an individual, leading to simplifications that could be detrimental to consumers when dealing with creditors and landlords
Consumer rights and data protection
The protection of consumer rights and data protection has become a central issue in discussions about credit rating systems such as Schufa in Germany. The German Federal Data Protection Act (BDSG-neu) has introduced measures that aim to balance the rights of the individual with the legitimate interests of the data processors. Among other things, Article 22, paragraph 3 emphasizes the need to protect the rights and freedoms of data subjects when exceptions are made to the standard data protection protocols.
Individual rights under the DSGV
Data protection officers have raised concerns about the restrictions on individual rights as set out in the first drafts of the BDSG-new, in particular how these could undermine the rights granted by the General Data Protection Regulation (GDPR). In the final version of the BDSG-new, some of these restrictions were mitigated, such as the deletion of the reporting requirement for disclosed sensitive personal data and the restriction of the right of access to personal data if this data is stored solely to comply with the legal obligation to retain data. Furthermore, the right to erasure can be restricted if fulfilling this right would impose unreasonable costs on the organizations or if the interest of the individual in having their data erased is deemed minimal.
Impact of Schufa scoring
Schufa’s scoring system plays a crucial role in assessing creditworthiness in Germany, similar to other credit rating agencies in the Western world. However, it is subject to strict regulations under both the GDPR and the BDSG, which require transparency and accuracy of the data used for scoring.
Compared to other credit rating systems in the Western world, such as the FICO score in the United States and the Comprehensive Credit Reporting (CCR) system in Australia, Schufa’s multi-layered approach stands out. While the FICO score operates on a simpler 300-850 scale, emphasizing payment history and credit utilization, the CCR system mandates the sharing of both positive and negative credit information, resulting in a more comprehensive picture of an individual’s financial behavior. These differences highlight a range of practices that reflect different regulatory frameworks and cultural attitudes towards credit scoring in different regions. Recent efforts by Schufa to improve transparency, such as the introduction of a score simulator and the development of a mobile app for score management, aim to empower consumers to understand and improve their creditworthiness. However, the Schufa scoring system remains controversial, particularly with regard to its impact on individuals who have fallen on hard times due to unforeseen life events, and raises questions about the fairness of such systems in credit access and decision-making.
As discussions around consumer rights and data protection intensify, Schufa is also subject to the provisions of the General Data Protection Regulation (GDPR) and the German Federal Data Protection Act (BDSG-neu) in Germany, which demand transparency in data handling and rigor in scoring processes
The procedure for calculating the Schufa score remains crucial for consumers who wish to take out loans, sign rental or other contracts, and affects many aspects of financial life in Germany.
Find out more about Schufa scoring and your rights as a consumer! Visit our website Dr. Schulte Rechtsanwälte in Berlin for more information. For advice in Polish, please visit our platform Twój Adwokat w Niemczech.
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Schufa scoring influences creditworthiness, rent and more. Find out how it works, what rights you have and how you can improve your score.
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