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CREDIT RATING

Schufa explained: How to avoid the ‘catch 22’ in Germany’s credit rating system

The process of obtaining a Schufa, which is needed for rental agreements, can be confusing and frustrating. We give you the low down on the German credit history system.

Schufa explained: How to avoid the 'catch 22' in Germany's credit rating system
Image: DPA

Of the many documents, numbers and permissions to obtain once moving to Germany, perhaps the most frustrating is the Schufa

In order to enter into most contracts – such as a rental agreement – the person or business you’re contracting with is likely to demand a Schufa certificate – a piece of paper which demonstrates your clear (or not so clear) credit record. 

The problem is getting a credit rating without having entered into a lease, contract or loan arrangement before, meaning that for new arrivals the Schufa can create a ‘catch 22’ situation. 

The system itself can also be confusing in the way it tallies the points. A person who has never missed a payment and should have a spotless credit score will never get a 100 percent rating, no matter how ‘in the black’ they are. 

While even debt experts find the process a little murky at times, we’ve broken down what you need to know about the Schufa system – and more importantly how to get that valuable piece of paper. 

READ ALSO: How one piece of paper holds the key to your future in Germany

Schufa (Shoo-Fa)

Dealing with bureaucracy on a regular basis proves that ‘German efficiency’ is but a myth, but at least the Germans are relatively efficient with their abbreviations.

Schufa is short for Schutzgemeinschaft für Allgemeine Kreditsicherung, which translates loosely to Protection Organization for General Credit Safety. 

And although it may not feel that way when your low Schufa score prevents you from renting a flat or opening up a line of credit, the goal of the organisation is to help – specifically to protect people from themselves and getting into too much debt.

Indeed, while German efficiency may be a myth, Germany’s almost pathological distaste for debt is not. 

What is a Schufa?

When people in Germany speak about getting ‘a Schufa’, they usually are referring to the document which confirms their credit status. It takes into account your previous payment behaviour – i.e. if you’ve missed payments or been in debt before – and then provides you with a percentage score. 

The more marks against your name, the lower the percentage is going to be. As the percentage gets lower, there are more restrictions on the types of contracts and debt arrangements you can get into. 

For instance, loans may come at a higher interest rate, or deposits may need to be higher.  

Image: DPA

A catch 22?

From the outset, getting a Schufa can seem like a catch 22. Technically speaking, in order to get one you’ll need an address. But if you’re in the process of getting an address, you’ll need a Schufa. 

Fortunately, as soon as you register in Germany, a credit rating will automatically be created for you. This means that it exists even if you don’t know about it and if you haven’t rented anything yet. 

There are a few different ways to get a Schufa, with the preferred one dependent on your budget and your time constraints. You are entitled to one free copy of your Schufa per year. 

SEE ALSO: ‘Know your rights’: The advice you need about renting in Germany

This can be done online, however it will take its time to get to you. We don’t know this for sure, but it certainly appears that Schufa Holding AG make this option a little more difficult – and a lot slower – as it doesn’t make them any money.

Just judging by how difficult it is to find on the website, we think this theory holds true. 

If you’re in a rush, you can order online at a cost of between €25 and €30. You’ll be provided with a soft copy which you can print immediately. 

There are also a range of other options which let you sign up and pay a monthly amount, although there appear to be few benefits to this unless you expect that your credit rating will fluctuate regularly (in which case you’ve probably got bigger fish to fry). 

The final option is to visit a bank and pay for them to print it out for you. This is immediate and will cost roughly the same as that above but will be printed on fancy bank paper. In order to do this you’ll need a German ID, or at least a passport and a proof of permission to live in Germany (if you’re from outside the EU).

Most banks will provide this service (because they make money off it) and you don’t need to have an account with them to do so. We know it works at Postbank, Volksbank and Deutsche Bank, with most of the others offering the same service.

READ ALSO: The ins and outs of buying property in Germany

Keep it 100

The points-scoring process for a Schufa is notoriously opaque. It has attracted criticism from NGOs and media sources for its lack of transparency. As we discussed here, movements have been growing to create an open and clearer system.

Advocates of the current system however argue that there is a need for secrecy, given the sensitive nature of the information – and the impact it may have on someone’s life. Either way, campaigns to alter the system are set to continue. 

One of the central mysteries of the system is the way in which the score is actually awarded. For instance, even for those who have paid every bill on time, they will not have a score of 100 percent.

Indeed, it’s not uncommon to have a score in the middle of the 90s even if you’ve got a spotless credit history. 

While this may be frustrating for those trying their best to ‘keep it 100’, fortunately all lenders and landlords are aware of this bizarre quirk, meaning they are not going to penalise you when your score isn’t three figures.

Member comments

  1. I signed on for 2 years with T-Mobile (mobile phone account), paid the first month, after which & to my surprise I received my “Schufa” that declared that I had always paid my debts (which was technically true) (I still pay my monthly phone bill but for Schufa that first month was enough to give me a clean sheet – go figure!) .

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For members

RENTING

EXPLAINED: How to sublet your apartment in Germany

If you’re going away for a period of time or want to cut your living costs, subletting your flat can seem like an appealing option. But there are a lot of things you need to consider first. We break them down.

EXPLAINED: How to sublet your apartment in Germany

What is subletting?

A subletting arrangement is when a subtenant is allowed to use the main tenant’s apartment, or part of it, in return for payment.

Having visitors in your home, even for a period of up to six weeks, does not count as subletting and you do not have to inform your landlord. But be careful: If the visitor starts paying rent, this becomes a sub-letting arrangement and if the visitor stays more than six weeks in a row, you have a duty to inform your landlord.

READ ALSO: The most expensive (and cheapest) cities in Germany to rent a room

If close family members such as parents, children, partners or spouses move in with you, this is also not a subletting arrangement and is considered part of the normal use of the rented property. 

However, you should inform your landlord of such a change in circumstance, not least because at some point the new person living in your apartment will at some point need to register with the local authorities.

Do I have to tell my landlord?

Yes. Regardless of whether you are just subletting a room or your whole apartment, you have to inform your landlord and, in most cases, you are required by law to obtain the landlord’s permission to sub-rent. This applies for whatever time period you want to sublet for: whether it’s for a weekend or for six months. 

One exception to this rule is if you rent a room in a WG (shared accommodation) and all of the tenants are equal parties to the contract. In that case, it’s possible to sublet individual rooms without having to get permission from the landlord, but you should still inform them.

If you try to rent out your place or a room without your landlord’s permission and get found out, you could face legal action, or be kicked out of your apartment before the agreed notice period. 

READ ALSO: REVEALED: The most – and least – popular landlords in Germany

Can the landlord refuse to let me sublet?

If the main tenant has a so-called “justified interest” in subletting part of the apartment, they can demand that the landlord agrees to the sublet and even take legal action or acquire a special right of termination of the rental contract if they refuse.

However, this right only applies to a sublet of part of the apartment and not the entire space within the four walls – in this case the landlord is within their rights to say no to the sublet. 

When subletting part of an apartment, a justified interest must be for an important reason such as a needing to move abroad temporarily for a job or personal reasons, or a partner moving out and the tenant no longer being able to cover the rental costs alone.

In general, landlords shouldn’t refuse your request to sublet unless there are good reasons – for example if the apartment is too small. 

The landlord can’t reject your subletting application without good reason and if they do, you can gain a special right to terminate your rental contract, and can even sue for your right to sublet. 

What information will I need to give my landlord? 

Whether you are subletting a room or the whole apartment – you’ll need to give your landlord the following information:

  • Who is moving in
  • How long you will be subletting for
  • For what reason you plan to sublet

If you want to set up a WG (Wohngemeinschaft or shared flat) as the main tenant, you should discuss this with the landlord beforehand, as it may be worth changing the apartment status to a shared apartment in the main rental agreement. That way, you won’t have to send a new application every time a new roommate moves in.

Do I need a special rental contract?

If you are going to subrent your apartment, it is definitely worth having a contract. 

A contract between the main tenant and the subtenant is completely separate from the contract between the main tenant and the landlord, so all responsibilities arising from the sub-rental contract will fall on you and not the landlord. 

A man fills in the details of a rental contract by hand. Photo: picture alliance / dpa | Armin Weigel

At the same time, as the main tenant, you will still be liable to your landlord for any damage caused by the subtenant, so it is best to put a clause in the sub-rental agreement that outlines how this will be covered, and also to make sure that your subtenant has personal liability insurance. 

There are plenty of websites that offer templates of sub-rental contracts for you to use, and you should make sure your contract includes the following information:

  • The personal details of the subtenant
  • The sub-rental cost and any service charges
  • When these are to be paid
  • Which rooms may be used
  • How many keys have been handed over
  • Details of a possible deposit
  • The condition of the rented apartment
  • House rules, such as no smoking, pets, etc.
  • Liability for possible damages

How much can I charge?

You can usually negotiate the sub-rental price yourself, but you should be careful not to overstep the rental limit per square metre for your area. If you charge over this amount and your subtenant finds out, they have the right to demand the local square metre rental price and you may have to refund them the total amount of overcharged rent.

If you sublet a furnished apartment, you can add a surcharge based on what you will be leaving in your apartment. You should also factor in the energy and water costs.

READ ALSO: Everything you should know about renting a furnished flat in Germany

Do I have to get consent from the local authorities?

In some cases, you will also need to get permission to sub-rent from the local authorities to rent out your place. 

If you sublet in Berlin or Frankfurt, for example, and you want to advertise your flat for holiday rentals, you have to get approval first.

A wooden judge’s hammer lies on the judge’s bench in the jury courtroom in the Karlsruhe Regional Court. Photo: picture alliance / Uli Deck/dpa | Uli Deck

If you go ahead and rent on a site like Air BnB without approval, you can expect to pay a hefty fine. Though the highest possible fine of €500,000 is unlikely, there are numerous reports of people getting fines in Germany of several thousand euros.

Another important thing to remember is that, if you make more than €520 profit in a year from sub-renting, you have to include this in your tax declaration.

Can the landlord demand I pay extra?

If a landlord allows subletting, they can also demand a share of the extra income from the main tenant. The amount of the surcharge cannot exceed 25 percent of the sublease, however.

Useful Vocabulary

to sub-let – Untermieten 

sublease agreement – (der) Untermietvertrag

termination without notice – (die) fristlose Kündigung

ban on misuse – (das) Zweckentfremdungsverbot

special right of termination – (das) Sonderkündigungsrecht

justified interest – (das) berechtigtes Interesse

personal liability insurance – (die) Haftpflichtversicherung

We’re aiming to help our readers improve their German by translating vocabulary from some of our news stories. Did you find this article useful? Let us know.

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