SCHUFA calculates scores to assess the creditworthiness of individuals. But how does it work? All about SCHUFA scoring and what it means.

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Creditworthiness scores provide a statistical payment forecast. How likely is it that transactions will be fulfilled in accordance with the contract, e.g. borrowed money in the form of a loan will be repaid on time or the invoice for an order already received will be paid. The higher the score, the higher the probability of payment. SCHUFA has now made scoring transparent and comprehensible. The new SCHUFA score applies across the board to the banking, savings bank, cooperative bank, telecommunications, retail and mail order/e-commerce sectors. With the new score, consumers and companies see the same score for the first time.

Gini and discriminatory power: For credit agencies such as SCHUFA, the Gini coefficient is the measure used to assess the quality of their score models. The "Gini" lies between 0 and 1. The higher the value, the better the score distinguishes people who are very likely to be able to repay from those with a poorer payment prognosis.

This is also referred to as discriminatory power. The better this selectivity is, the higher the predictive quality of the score models. This prevents payment defaults and over-indebtedness.

When developing the new SCHUFA score, it was important to maintain the forecasting quality and at the same time offer a score that is easy for people to understand. With a Gini of 0.6, the new score has the same high forecasting quality as its predecessor. This underpins the SCHUFA score's quality leadership in the consumer segment.

Regression: The mathematical-statistical method used by SCHUFA for the new score is logistic regression. This procedure learns on the basis of examples under human guidance by independently extracting statistical correlations from the data.

SCHUFA trains the procedure with reliable data and relies on experts who check and adjust the systems with regard to prediction quality, reliability and stability. This means that people at SCHUFA are always in control.

The scientific nature and selectivity of the procedure has been confirmed by independent external experts and disclosed to the responsible data protection supervisory authority. The procedures are based on the personal data that is also shown in the in accordance with Art. 15 GDPR.

Scoring involves making forecasts for the future based on past experience. The basis for this is the analysis of many payment experience values. Statistical-mathematical methods can be used to determine criteria for which a clear correlation with the creditworthiness of consumers - in both a positive and negative sense - has been proven. Depending on the score model (for retail, banks, telecommunications companies, etc.), different criteria can play a role or the same criteria can be of different importance.

In the event of a request from a company for creditworthiness information, SCHUFA then calculates a score on the basis of the data available on a person - completely up-to-date, because the data situation can change at any time. When calculating the respective score value, the financial behavior of persons - for whom similar information is available - is compared with each other.

The more relevant information about a person can be analyzed, the more accurate the score is. And the more reliably the actual creditworthiness is depicted. This is also the reason why consumers who have, for example, paid off a loan in accordance with the contract can have a higher score than people who have no credit obligations at all - and about whom no other data is available.

SCHUFA's scoring system has been found to be applicable by the competent data protection authority on the basis of expert opinions on scientific validity and has also been reviewed by independent scientists:

• Saarland University of Applied Sciences(Department of Mathematics, Engineering Sciences)
• Frankfurt University of Applied Sciences; Frankfurt(Department of Computer Science)

In addition, all our score calculations are subject to the GDPR, the General Data Protection Regulation.

In principle, companies may request creditworthiness information about a person from SCHUFA on the basis of a so-called legitimate interest. A legitimate interest exists when companies make advance payments, i.e. in transactions in which consumers are provided with goods or services before payment or money in the form of a loan.

SCHUFA has stored credit-relevant information on around 68 million people, e.g. on current loans or whether there are current accounts and credit cards and, if so, how many and since when. However, information may also be available on payment defaults (e.g. an invoice that has been reminded several times and has not been paid despite reminders) or information from public announcements, such as ongoing consumer insolvency proceedings.

It is important for a company to know whether there are invoices that have not been paid despite multiple reminders. For banks, it is also important to know whether a person has other loans outstanding in order to fully assess their creditworthiness.

Many companies want more than just this information. They would like to know how high - statistically speaking - the probability of payment is for a desired contract. And this is where scores can help. They analyze the available information and provide a payment forecast.

Scoring gives companies and banks the opportunity to better assess the opportunities and risks of concluding a contract in order to minimize payment defaults. A higher score indicates a higher credit rating and therefore a lower risk of non-payment for companies.

Scoring also helps to protect people with a lower credit rating from possible over-indebtedness.

Every company assesses for itself whether and under what conditions it wants to conclude a transaction. In addition to the creditworthiness information from SCHUFA and a score calculated by SCHUFA, it generally also uses its own data, which is incorporated into the company's own risk assessment: Banks, for example, on income and employment, online retailers often on the type and amount of the shopping basket.

Even a negative SCHUFA entry and a low score do not necessarily mean the end of a business deal. Even then - as we can see in our database - the desired contract can still be concluded. However, one thing is certain in the end: it is not SCHUFA but each company itself that decides whether a contract is concluded with you. You can find out more about