Unless you are keen on living in a Wohngemeinschaft (WG), a shared flat with who knows how many flatmates, the hunt for an apartment in Germany begins with the acronym SCHUFA.
SCHUFA, pronounced as if it were the secret love child of a shoe and sofa, stands for Schutzgemeinschaft für Allgemeine Kreditsicherung. Challenge: Try saying that three times fast. But pronunciation is only half the battle. What you were really wondering is: ‘What the hell is a SCHUFA and why do I need it?’ And rightly so (no worries, it is not a shoe-shaped sofa).
More than an acronym
When you plug these words into Google Translate you will get this back: Protection Association for General Loan Guarantee. Come again?
First there is the SCHUFA Holding AG, a private German company that uses a credit rating system to provide credit reports to interested parties. When most people ask for a SCHUFA, they mean the SCHUFA Auskunft, a credit report used throughout Germany. When applying to rent an apartment many landlords insist on this information as it provides what I like to call a credibility snapshot: how often have you missed loan payments, left bills unpaid and how much debt you have accrued.
Your SCHUFA is even more important than your income when it comes to securing an apartment. Regardless of whether you make 500 euros a month or 500,000 euros a month, if your SCHUFA sucks you can expect to get turned away.
To order online or not
There are three main ways of acquiring a SCHUFA, both with their own pros and cons. Many people opt to get one online. This is a fine option that helps you avoid the hassle of visiting a Deutsche Postbank, but you will need a German ID. Otherwise you can download the necessary forms, attach a copy of your passport and your official residency certificate, and mail it in.
Applying for a SCHUFA these two ways costs around €30, and if you mail it in you will obviously have to wait. In my experience, Germans are fairly quick when it comes to processing and sending out documents. However, ToyTownGermany, an online expat forum, is full of horror stories where reports never arrived or they were duped into purchasing unofficial SCHUFA reports. An official report will have copy protection, a water mark and compact overview that is easily shared with inquiring parties.
Side note: As soon as you open a bank account, which requires registering at a Bürgeramt, consider yourself in the system. Unpaid bills will start impacting your SCHUFA score, even if you’ve never requested a report.
If you do apply online, I recommend finding a German speaker or asking your HR department to help you work through the application process. Or call SCHUFA directly. They speak English.
You are also legally entitled to one free SCHUFA a year. Because it does not generate any revenue for SCHUFA Holding AG, this option is not as well advertised as the paid options and, rumour has it, takes longer to get the results.
One SCHUFA to go, please
My experience is often that ordering online, which is meant to make things faster and more efficient, ends up taking longer than going in person. Cue Deutsche Postbank, who partnered with SCHUFA: I had the report in an hour, and it cost me the same. If you are in a hurry, take all your documents and go in. This is your best bet.
But before you go, remember that this is Germany. A country where landlords will ask for a credit report, which requires proof of residency in Germany and a bank account, which you can only get by having a valid address. The only way I know of getting around this, also called the bureaucratic circle of death, is by opting for a WG initially. This gives you time to sort out the paperwork you need after arriving.
Bad SCHUFA?
Everyone starts out with a high SCHUFA, but as soon as you start missing payments or making other financially-unwise decisions, that number decreases. For all intents and purposes, you’re going to want to keep your SCHUFA at 90% or higher.
But let’s say life gets messy and for whatever reason your SCHUFA is getting low: What can you do? First, start by doing everything in your power to resolve the negative entry, which occurs when you make late payments. Then step up your finance game and make sure you are on top of all your payments. Basically, pay your bills regularly and your debts off in time.
A word of caution: These negative events do not just disappear, they keep your SCHUFA lower for years to come if left unaddressed! And if you plan on leaving Germany with bills unpaid, think again. If you ever come back to Germany, you’ll find yourself in hot water. Plus, SCHUFA keeps track of your financial activity across all of Europe. There is no escape.
But if you are interested in monitoring your credit, it might be worthwhile to check out Bonify. The FinTech startup offers an app that lets users monitor their credit score, while managing their finances.