Berlin It’s a late step: after a long period of pressure, Schufa wants to become more transparent and on Thursday presented his scoring simulator. With the help of this simulator, consumers can understand for free how Schufa measures customer creditworthiness. For example, you need to answer questions about checking accounts, credit cards, and loans. It also becomes clear how consumers can improve their solvency.
The creditworthiness determined by the scoring simulator is summarized in a score, i.e. a numerical value, and should be close enough to the base score that Schufa himself determines. Schufa boss Tanja Birkholz sees this scoring simulator, which has been released, as the first step in making Schufa “explainable”. “In the past, we have never sought communication at eye level,” admits the former Commerzbank risk manager, who has been in charge of Schufa since mid-2020.
It is his personal concern to change it. Finally, Schufa is a mediator between consumers and companies of considerable importance. The credit agency receives 300,000 solvency requests every day. According to Birkholz, in the next year, consumers will also be able to use an app to access their data for free and add it.
Without private credit agencies like Schufa, small jobs in the economy. For example, if consumers apply for an installment loan, the banks obtain information on the customer’s creditworthiness from Schufa.
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Using the information collected by Schufa, the credit agency makes a forecast of how high the likelihood of payment disruptions is in the future. This is done using a so-called scoring. The higher the bank score, the lower the risk of default. There are scores for other sectors as well, but the bank’s score is by far the most important.
90 percent of the information is positive
For many consumers, Schufa’s businesses have so far been a black hole. Experts such as Professor Gert Wagner, a member of the Advisory Council on Consumer Affairs, have always advised Schufa to be more transparent. This would increase their acceptance in society. However, Schufa’s algorithm for calculating creditworthiness remains taboo. Schufa received legal support for secrecy from the Federal Court of Justice.
Schufa points out that about 90 percent of the information they store is positive. This includes contractual conduct with checking accounts, credit cards, installments and real estate loans. Soft negative information is, for example, suspicious and uncontested claims, consumer insolvency proceedings are hard negative information.
However, the question arises as to how Schufa arrives at his ratings. The credit agency provides some insights. For example, it has been empirically shown that the risk of non-payment is significantly greater for customers who have five or more loans than for consumers who make no more than two loans.
What the score depends on
However, this does not have to lead to the conclusion that people without a credit history per se receive a higher score than those who have one. When young people open an account, no payment or refund information is available. Therefore, the score should be in the middle.
The score only increases if the customer demonstrates over time that they manage the account responsibly, for example if they do not regularly exceed it. Frequent moves tend to worsen your credit rating. This does not take into account the fact that a work-related move could increase the consumer’s income.
Schufa provides banks, telecommunications companies, resellers and other industries with important customer information. “But we’re just one piece of the puzzle. Businesses have other options to test creditworthiness and make a final decision,” says Birkholz.
The data can be kept longer
Scores can also be valued differently by banks. It depends on the risk policy of the company. Some are more interested in taking more risks because it offers higher profit margins in return.
A Schufa project should be followed with eagle eyes by consumer advocates. In the future, Schufa would like to give people the opportunity to voluntarily store data that improves the score for longer. Loans that have been repaid and paid on time are currently deleted from the Schufa database after three years.
But this cancellation could lead to a worsening of the score. “With the explicit permission of the customer, we could store the data for longer, which would have a positive impact on their score,” says Birkholz. In principle, consumers should also be able to grant Schufa account information.
Moreover: Schufa records an increase in negative reports