In this last article I spoke about the SCHUFA report and the SCHUFA score. Checking it regularly – once a year at best – is one thing, but keeping it as high as possible is much more important!
Because practically every time you sign a contract, apply for a loan, open an account and in many other situations, your SCHUFA and thus your SCHUFA score is queried.
The service provider then receives your SCHUFA score: a number on a scale of 0-100% about how likely it is that you will pay your bills or installments.
Your SCHUFA score should not fall below 90% and, in the case of a planned mortgage, it should be at least 95%. Otherwise, the bank could make higher demands, offer worse conditions or, in the worst case, even refuse the loan at all.
So if you – like me – would like to take advantage of real estate financing in the future, whether for capital investments or your own home, you can and should prepare and do something about it now.
So how do I improve my SCHUFA score?
As you may expect, SCHUFA itself does not disclose any details about how exactly the SCHUFA score is calculated, as it is part of the service banks and other companies pay for.
However, I came across these 8 interesting tips that I consider plausible and will apply for myself in order to improve my credit rating and thus my SCHUFA score as much as possible.
Check your SCHUFA report for errors
Once a year, everyone has the opportunity to obtain their own self-disclosure from SCHUFA free of charge, the so called SCHUFA report.
Not only did I find out what the latest status of my SCHUFA score is, but I can also see what is currently stored about me at SCHUFA. So here I went through all the entries one by one and checked them for errors.
If there were errors or even negative entries in my SCHUFA, I would contact SCHUFA as soon as possible to either correct the mistake or first look at the negative entry and then ask for an appropriate correction. Especially negative entries ruin your score tremendously!
Always pay bills and loan rates on time
This tip also sounds simple, but it’s really important. In my opinion, there is no advantage in delaying the payment of an invoice, for example, not paying until the end of a 14-day payment period.
On the contrary, I only run the risk of not fulfilling the contract on time and automatically triggering the first reminder. This leads to additional costs, and in the worst case to a report at the SCHUFA. The same applies, of course, to loan installment payments.
Avoid too many small loans and too much debt
Of course, my creditworthiness also depends a lot on how many loans I have and how much debt I have overall.
It even seems that one large loan is rated better than many small ones. But regardless of that, my credit rating goes down with each individual loan. That’s because the likelihood that I will not be able to repay a loan increases with each loan I have still open. All the more so if you have virtually no net assets or even negative net assets.
This is not the only reason why I attach great importance to not having any debts and would like to keep it that way, with the exception of real estate financing for capital investments!
Get rid of unnecessary bank accounts and credit cards
Over the years, I tend to accumulate several accounts, especially because current accounts at direct banks are not only free, but also have attractive offers VISA credit cards for free cash withdrawals abroad or very appealing welcome bonuses, or because a bank doesn’t provide just one credit card, but several ones.
However, the opening of countless accounts – as in my case – and also the frequent switching of the account probably leads to the fact that the credit rating can also suffer here. The SCHUFA evaluates – which also sounds logical – long contractual relationships positively.
For this reason, and because I simply don’t need so many accounts, little by little I got rid of all unnecessary bank accounts and credit cards. A positive side effect is that these accounts can no longer be misused by third parties.
What remains is my main checking account, a joint account with my girlfriend and another checking account that I can use for side projects and as backup in case my mean one isn’t reachable. All accounts are free of charge so far.
Avoid overdraft, but demand the highest limit
On the one hand, I try to avoid my accounts ever going into the red. Secondly, I try to completely avoid short-term credit solutions. This includes, above all, overdraft facilities.
Because the fact is, if you can’t keep your accounts afloat and have to resort to emergency loans, SCHUFA rightly doubts your creditworthiness.
But the second half of the title is even more important.
Even if one will never use the overdraft facility, one is supposed to request the highest limit. After further research, however, the idea behind this seems to be that you are signaling to SCHUFA that you are creditworthy enough and that the bank thus trusts you.
Because what SCHUFA doesn’t know, it can’t evaluate. That’s why it’s important – whether in this way or not – to send positive signals to increase your SCHUFA score.
Avoid moving too often
Of course, this is easier said than done, because especially when you are young and need to be flexible, you move relatively often. In the US culture it is even more common to move around than in the European one.
However, as with changing accounts too often, there is probably some truth to this, because for SCHUFA, a predictable and reliable person is certainly in a more positive position than one who stands out due to frequent changes in all areas of life.
Report data abuse immediately
Unfortunately, it also happens that the identity of another person is stolen and exploited and thus, for example, a negative SCHUFA entry is created, without you have noticed anything.
It is not always possible to prevent this, but as soon as such a case comes to light, the data misuse should be reported to SCHUFA as soon as possible.
From now on, I will request a SCHUFA report every year and because it is free of charge once a year, I would advise you to do the same. This is the only way to uncover any misuse of data, should it have made it into SCHUFA and affect your SCHUFA score.
Avoid too many credit inquiries
Especially when it comes to real estate financing, you should talk to as many banks and brokers as possible to negotiate the best possible conditions.
One should be careful, however, that not every bank starts querying the SCHUFA and asking for your SCHUFA score. It is clear that every bank wants to query my credit rating, but unfortunately this can also be interpreted as a sign that you have problems getting a loan from a bank, and not just once, but multiple times in a short period of time.
So what I will do is that I still talk to as many banks as possible, but explicitly point out that no SCHUFA score should be queried yet. Only when the choice falls on few banks you can allow them to ask for more information and also consult the SCHUFA score.
Until then, I could also provide the banks with the SCHUFA report I requested this year. For a first indication this should be more than sufficient.
How to get the SCHUFA report and your SCHUFA score
Please refer to this article if you want to know how to request your SCHUFA report:
The infamous SCHUFA report in Germany: How to apply for it and what it says
The official SCHUFA website is www.meineschufa.de. There you can find insights into your creditworthiness, check SCHUFA entries, update your information and much more.
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