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Schufa: How foreigners can improve their German credit score

Whether you've seen your credit score or not, this unassuming number can have a big impact on your life in Germany. Here's how to find out more about your Schufa rating and what to do to improve it.

German credit score
A woman gets an unpleasant surprise when checking her Schufa. Photo: picture alliance/dpa/dpa-tmn | Christin Klose

Do I even have a German credit score?

You should do. As soon as any new arrival registers at an address in Germany, an organisation known as the Schutzgemeinschaft für Allgemeine Kreditsicherung (the General Credit Protection Agency) sets up a credit score for you and starts tracking your financial behaviour.

This company, which is known as Schufa for short, is essentially there to help people avoid racking up tonnes of debt – but the data they have on you is used by all sorts of credit institutions to decide whether you’re likely to be a trustworthy person to lend to.

While this may not sound relevant for anyone who isn’t taking out a bank loan or mortgage, the information in the Schufa can impact a number of day to day things in Germany. You’re likely to need it when applying for flats, and internet and phone providers, gyms and banks are all likely to run checks on you before accepting you as a customer. In other words, the Schufa can be your best friend in Germany – or your worst enemy.

READ ALSO: What are the best banks for foreigners in Germany?

Where can I find my German credit score?

Everyone is entitled to a free copy of their Schufa report once a year to keep track of their credit rating. You can get hold of this by filling in your details online at meinSchufa.de. To get the free version, you’ll need to order the ‘Datenkopie nach Art. 15 DS-GVO’, so click on ‘Datenkopie bestellen’ at the bottom of the home page, fill in the form and upload a scan of your passport or personal ID card. 

The paper report will be sent by post and will contain some basic information like the date that your Schufa began, the dates you took out certain contracts like bank accounts or an internet contract, and your overall credit score. 

While this can be useful for applying for contracts, however, most landlords won’t accept it for the purposes of renting a property. This is because it doesn’t contain detailed information about your financial history and is really intended for your eyes only. 

German credit report

A pair of glasses lie on top of a German credit report. Photo: picture alliance / Jens Kalaene/dpa-Zentralbild/dpa | Jens Kalaene

If you want a more detailed breakdown of your credit score, you’ll need what’s known as the ‘Schufa-BonitätsAuskunft’. In other words, an official Schufa credit report. 

This costs €29.95 and can also be ordered via meinSchufa.de for delivery by post. If you need it faster, however, you can also get it the same day by going to your nearest Postbank or Volksbank branch with your passport and Meldebescheinigung (the piece of paper you got when you registered at your address).
 
Alternatively, you can order an online version of the Schufa-BonitätsAuskunft that will be sent to you within five minutes. This contains less information than the paper copy but will usually suffice in an emergency – for instance, if you have a house viewing the same afternoon and can’t make it to the bank. 
 
 

What counts as a good Schufa rating?

A Schufa rating is calculated in percentage points up to 100, with 100 being the absolute best and 0 being the worst.

Everyone starts with a ‘perfect’ score of 100, but points can get docked for things like missed or late payments, unsuccessful credit applications or staying in your overdraft for long periods of time.

This is how many lenders will see you depending on your score:

  • 97.5 and above: Very low risk
  • 95 – 97.5: Low to negligible risk 
  • 90 – 95: Satisfactory to increased risk
  • 80 – 90: Increased to high risk 
  • 50 – 80: Very high risk
  • 50 and below: Critical risk 

In a competitive housing market, having a score even slightly below 95 could mean that landlords start to see you as a slightly more risky option, and may go for someone who appears to have a cleaner financial history. 

By the time your score goes below 90, you could start to have problems getting accepted for certain contracts or loans, and a score below 80 could be disastrous. So unless you have a near perfect number on that Schufa, it almost always pays to increase your score. 

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

How do I improve my Schufa score? 

Building up your credit rating is more of an art than an exact science, but two of the most important factors are stability and consistency.

While foreigners from other countries may be used to juggling multiple credit cards or bank accounts, this kind of thing is frowned upon in Germany and is unlikely to have a positive effect on your Schufa. 

It’s best to try and limit yourself to one or two credit cards and no more than two or three German bank accounts, unless you have a really good reason for needing more. Credit card payments should be made on time each month and, if possible, you should try and avoid having low balances or slipping into the red in your bank accounts. 

Smashed piggy bank

A smashed piggy bank. Having fewer accounts to your name is an easy way to improve your Schufa score. Photo: picture alliance / dpa | Peter Kneffel

Having a limited number of accounts can also help you keep track of things like direct debits and other outgoings. It also makes it more likely that you’ll actually use your credit cards and various accounts – which is a good thing since having unused cards and accounts can also be a red flag for lenders. 

Once you have everything set up, try and avoid switching accounts too regularly, as this can also have a negative impact on your score. The same goes for moving house every few months or taking out new forms of credit on a regular basis. 

Other ways to brush up your Schufa score include: 

  • Consolidating loans: One larger loan looks better on your credit report than several smaller ones, so consolidate your debts where possible
  • Closing accounts, contracts and credit cards you don’t need or that are inactive
  • Paying off credit balances and trying not to add to them 
  • Getting incorrect entries on your Schufa report deleted 
  • Addressing any issues that could affect your Schufa report as soon as possible and asking the company to withdraw their statement to Schufa 
  • Adding an overdraft facility to your bank account – but staying within its limits 

What else do I need to know? 

It’s worth taking advantage of the free Schufa reports each year simply to keep on top of your creditworthiness and find out if anything could be harming your score. Getting turned down for credit is a sure-fire way to affect your rating, so you may decide to try and build up your score over time before applying for a new credit card or contract. 

Speaking of contracts, foreigners should be aware that the default contract length in Germany is usually 24 months. Once you’ve agreed to this, it can be hard to get out of, and missing payments can have a big impact on your Schufa score. To try and keep a healthy rating, make sure you know exactly what you’re signing up for ahead of time and consider whether you can meet those financial commitments.

It’s also worth knowing the difference between a Kreditanfrage and a Konditionsanfrage when researching conditions for loans or other financial services. Putting in a credit request, or Kreditanfrage, can have a negative impact on your credit score because it can look as if you’re repeatedly getting rejected by lenders. 

Instead, be sure to opt for a Konditionsanfrage – or condition request – which won’t have any impact on your credit score. 

READ ALSO: How Germany is making it easier for consumers to cancel contracts

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ENERGY

Reader question: How do I install a heat pump in my German property?

With gas prices higher than ever, many people in Germany are turning to heat pumps as a climate-friendly alternative for heating a home. If you're thinking of following suit, here's how to get started.

Reader question: How do I install a heat pump in my German property?

What are heat pumps – and why am I hearing so much about them?

Heat pumps are an electricity powered, energy-efficient way to produce warm water and heat inside the home. They work by transferring heat from the air, water or ground outside, compressing it to make it warmer and moving it around the building in a network of pipes. In summer, many heat pumps can also work in the opposite direction, extracting hot air from inside the building and circulating cool air from outside. 

Though the German government has been promoting this climate-friendly heating solution for a while, the demand for heat pumps has shot up in the wake of the current energy crisis. 

Last year, the number of heat pumps being installed in Germany increased by 28 percent to 154,000. The government hopes to be installing 500,000 of the devices per year by 2024.

Russia’s war on Ukraine has not only prompted a huge hike in gas prices, but also raised questions about the security of Europe’s energy supply. In this context, heat pumps have become attractive not just as an eco-friendly choice but also a potential money-saver that contributes to reducing Germany’s dependence on Russian gas.

What types of heat pump there?

There are three main options people should know about when deciding what type of heat pump to get. Though all of them function largely in the same way – by moving thermal energy around – they vary based on their sources of heat.

The first, and cheapest option, is a heat pump that extract heat from the air. The second, more efficient and slightly pricier option, is a pump that uses heat from below the ground. The third, most efficient and most expensive option, is a heat pump that gets its thermal energy from water – though these can be hard to get approval for.

Two heat pumps outside block of flats

Two heat pumps outside a block of flats. Photo: picture alliance/dpa/STIEBEL ELTRON | Marcus Pietrek

You can find out the efficiency of a heat pump through the Annual Work Figure (JAZ), which describes how many kilowatts of heat energy can be created from one kilowatt of electricity. According to experts, a JAZ of 3.3 or more – meaning just a third of the electricity goes into generating heat – would make a heat pump worthwhile. Most modern heat pumps tend achieve a rating of four at least. 

READ ALSO: Reader question: Should I modernise my heating system in Germany?

How much does it cost to install one?

That partly depends on what your existing heating system is like and whether wider renovation works need to be carried on your building to make the heat pump worthwhile. However, energy consultancy Renewa provide the following ballpark figures for the pump and installation:

  • Air heat pump: €15,000
  • Ground heat pump: €25,000
  • Water heat pump: €30,000 

The Verbraucherzentrale consumer advocacy group has slightly different estimates. They believe an air-source heat pump costs around €20,000-25,000, a ground-source heat pump costs €15,000-€20,000 for the device and around €50-100 per metre of drilling and a water-source heat pump costs anywhere between €25,000 and €40,000 for the device and installation. 

As a rule, installing a heat pump in a new-build property is likely to be a fair bit simpler than installing one in an older property. That’s because newer properties tend to have high energy efficiency standards, while older ones may require better insulation and other preparation work to make the heat pump worthwhile. 

Another factor that can impact costs are the ground conditions in your region. The difficulty of drilling through rocky soil in places like southern Germany can cause labour costs to spiral. 

READ ALSO: How much extra will German households pay under new gas surcharge?

Can I get any state subsidies?

The Economics Ministry has recently reduced the level of the subsidies for people installing new heat pumps, citing the debt break and limited resources. However, there’s still a fair amount of financial aid up for grabs.

While previously people could get up to 50 percent of their new heat pump system paid for by the state, this has now been reduced to 40 percent, up to a maximum of €24,000. This consists of the basic subsidy of 25 percent, plus an additional 10 percent if you replace an oil heating system or a gas heating system that is more than 20-years-old. 

There’s also another five percent bonus available for people who opt for a ground-source heat pump or a water-source heat pump.

In addition, you can get up to 80 percent of the costs of an energy consultant paid for by the government. This is capped at €1,300 for a detached or semi-detached house and at €1,700 for buildings with at least three apartments in them.

How do I get started?

One of the best ways to get started – and find out if a heat pump is right for you – is to book a consultation with an energy consultant. Though you don’t always have to have one, they can be invaluable in helping you navigate all the technical complexities of replacing your heating system and planning out the project. 

It’s also good to get a heads-up about whether there are more urgent energy efficiency measures you should be taking, like replacing drafty old windows. In some cases, these will need to be fixed before you can think about changing your heating system. 

As mentioned, the subsidies for energy consultants are still incredibly generous, so it’s usually worth getting the additional support.

An air-source heat pump outside a house in Germany.

An air-source heat pump outside a house in Germany. Photo: picture alliance/dpa | Silas Stein

If you own a flat in a larger building, you’ll likely have to propose installing a heat pump at the next home owners’ meeting. The benefit of this is that, if other owners in the building agree, you can probably split the cost of the heat pump between you. The less good news is it will likely need to be put to a vote, and the “too many cooks” scenario could end up leading to a kind of stalemate in which nobody wants to take responsibility for anything.

In a single-occupancy house, things are much easier – though the downside is that you’ll have to bear the costs yourself.

READ ALSO: Should I install in an electric heater in Germany this winter?

How do I get hold of those subsidies?

State subsidies should be applied for online on the Federal Office of Economic Affairs (BAFA) website. You can do multiple applications at once, but it may work out best to do the consultant first because they can put together a document that could nab you a five percent ‘bonus’ subsidy for the work.

This is known as the individual renovation roadmap (iSFP) and sets out a number of energy saving proposals for your home. The expert should also confirm that these are being implemented in order for you to get the bonus.

In addition, you’ll need to attach a cost estimate for the work to the funding application. This should be a realistic estimate as it cannot be subsequently revised upwards if the work turns out to be more expensive.

Crucially, it’s best to hold off on starting the process – including signing any contracts – until your funding application is approved or at least submitted. That’s because BAFA doesn’t fund projects after construction has already started, which occurs the second you agree on a deal with a heat plump supplier or installation company.

Once you receive confirmation of the subsidies from BAFA, the work of installing your new heat pump can begin. 

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