SCHUFA Holding AG, or SCHUFA for short, is one of the best-known credit reference agencies in Germany. Its name is an acronym of ‘Schutzgemeinschaft für allgemeine Kreditsicherung’ (protection association for general credit security). Since its foundation in 1927, it has developed into a central instrument of economic life. With its data collection and evaluation, it has a decisive influence on the financial reputation of private individuals and companies. A negative SCHUFA entry can have serious consequences, ranging from more difficult access to credit to the rejection of rental requests.
How does SCHUFA work?
SCHUFA collects data on the financial reliability of consumers and businesses. These data come from various sources:
- Contracting partners such as banks, telecommunications companies or online retailers provide information on contract conclusions, payment defaults or insolvencies.
- Public registers such as the debtor register or commercial register also provide information.
On the basis of this data, SCHUFA calculates a so-called score value that rates the creditworthiness of a person or company on a scale. The principle is: the higher the score, the lower the risk for the business partner.
The importance of a SCHUFA score
The SCHUFA score is crucial in many areas:
- Granting of credit: Banks use the score to decide whether to grant credit and to determine the terms and conditions.
- Tenancies: Landlords check the score to assess the solvency of potential tenants.
- Contracts: The score also plays a role in mobile phone, leasing or instalment payment contracts.
A high score (e.g. 97% and higher) indicates a very good credit rating, while a low score (below 80%) is often considered a risk factor.
Problems and criticism: incorrect entries and a lack of transparency
Although SCHUFA plays an important role, it is also criticised. A central point of criticism concerns incorrect entries, which can cause considerable damage. According to a study by the Hamburg Consumer Advice Centre, around 30% of SCHUFA information is incorrect or incomplete. Typical errors include:
- Falsely reported claims: Debts that have already been paid continue to be listed as outstanding.
- Confusion: Data from different people is mixed up.
- Outdated information: Deletion deadlines are not met.
Such errors can have serious consequences. For example,
a consumer wanted to rent an apartment but received a rejection due to an outdated SCHUFA entry. It was only after intensive research and legal support that the error could be corrected.
Data protection framework
The General Data Protection Regulation (GDPR), which has been in force since May 2018, establishes clear rules for the processing of personal data. SCHUFA is also bound by these rules. The key principles include:
- Data minimisation: Only the data necessary for the purpose may be collected.
- Transparency: Data subjects must be informed about the processing of their data.
- Rights of data subjects: Consumers have the right to access, rectification and erasure of their data.
Case law on SCHUFA
The courts have repeatedly dealt with the work of SCHUFA and the rights of consumers. Some landmark decisions:
- ECJ, judgment of 17 July 2021 (C-356/19): The European Court of Justice ruled that the SCHUFA scoring system is inadmissible if it is used exclusively as the basis for important decisions, without further individual checks.
- BGH, judgment of 22 February 2022 – VI ZR 123/21: The Federal Court of Justice clarified that disputed claims may not be reported to SCHUFA without further ado. Consumers must be heard beforehand.
- Higher Regional Court Frankfurt, decision of 1 October 2020 – 17 W 28/20: The deletion periods for data on insolvencies have been specified. This data may only be stored for a maximum of three years.
Tips for consumers: How to deal with SCHUFA
Those affected can do a number of things to avoid negative consequences:
- Regular checks: Every consumer is entitled to a free SCHUFA report once a year (Section 34 of the Federal Data Protection Act). This should be used to identify errors at an early stage.
- Request correction: Incorrect or outdated entries can be corrected directly with SCHUFA. In the case of disputed entries, it may be useful to seek legal assistance.
- Preventive measures: Good payment behaviour and avoiding excessive credit inquiries can help to positively influence your score.
A real-life example:
A family noticed an incorrect SCHUFA entry when applying for a home loan. With the help of a lawyer, the entry was successfully challenged and the loan was ultimately approved.
SCHUFA entries as a means of exerting pressure
An increasingly problematic issue is the threat of SCHUFA entries to force payments. According to § 241a BGB, it is not permissible to put consumers under pressure with such threats. This can even be considered criminal coercion (§ 240 StGB).
An example:
A telecommunications company threatened a customer with a negative SCHUFA entry, although the claim was disputed. The court ruled in favour of the customer and ordered the company to desist.
Conclusion: Opportunities and risks of SCHUFA
There is no doubt that SCHUFA is an important instrument in economic life. Its data facilitates decisions and helps to reduce risk. At the same time, the system poses risks for consumers, particularly due to incorrect entries or misuse.
Thanks to the GDPR, consumers today have stronger rights that they should actively use. Regular checks, careful handling of one’s own data and legal support in case of problems are key to using SCHUFA responsibly and avoiding negative effects.
Free initial assessment: Contact us!
Do you have questions about your SCHUFA entry or would you like to know how to proceed against incorrect data? We are happy to help! Use our free initial assessment to check your options and take the right steps.
Contact us today:
Dr Thomas Schulte – Attorney
Malteserstraße 170, 12277 Berlin
📧 Email: dr.schulte@dr-schulte.de
📞 Phone: +49 30 – 22 19 220 20
📠 Fax: +49 30 – 22 19 220 21
We are at your side with our experience to protect your interests!