The majority of daily life revolves around all sorts of payments from utilities such as rent to gas and electric. Therefore, it makes sense that before a loan or finance agreement is provided the applicants can maintain the contracted payment agreement. For German citizens this is referred to as a SCHUFA Auskunft or more commonly Selbstauskunft and for anyone living in Germany plays an essential part of managing money.
Why a SCHUFA information is important!
Lenders are an important part of daily life providing payment agreements for loans, mortgages, cars, and many other products & services. Often lenders before accepting applications check German citizens SCHUFA information to see how reliable in the past they were making agreed payment plans and to check if any defaults have occurred. This can be calculated as a number known as a credit score that determines if an applicant is a low or high-risk borrower.
The better your credit score the more likely you are to be approved for financial agreements and best of all you'll be offered better interest rates. A higher score means lenders fight for your business while a low score is classed high risk and finding a lender will be challenging.
Why check your SCHUFA information before Applying to Lenders
The majority of lenders have strict lending criteria regarding who they will lend to in order to manage their internal risk. Lenders upon receiving an application run self-disclosure checks to classify the applications risk as low, moderate, or high. These checks leave a trace on the SCHUFA Auskunft of German citizens and unfortunately a rejection can negatively impact credit scores.
It's best to check your SCHUFA information before applying to lenders to make sure you are eligible and to avoid negatively impacting your self-disclosure with rejections. Find out how we can help!
Who needs a SCHUFA information Check?
Now we know what a SCHUFA report is and how important it is to the daily lives of German citizens we can explore a few examples when a check is recommended. Almost everyone at some point in their life will enter a finance agreement so knowing when you'll be expecting a credit check is important to avoid unwanted rejections and to know before if you'll be approved.
Payment Plan Products/Services
Often paying for a product or service is not done in one single transaction as most would be used to when buying small purchases such as groceries. However, on occasion payment plans can be setup when the cost of the product or services is either a lot of money or is a recurring subscription. To make sure the payment plan can be maintained a credit score check is often done before an agreement is signed.
One big purchase that almost everyone will make is that of a car and a lender can come in handy when short or cash. A lot of people use their good self-esteem to set up payment agreements for a dream car that would normally take years of saving.
Applicants looking to get a personal loan from the bank often opt for a SCHUFA check prior to make sure they meet the lending eligibility criteria. When rejected from a loan application your credit score can be negatively affected so checking beforehand is always suggested.
Unlike the majority of examples on this list a mortgage is often going to be a payment agreement that spans decades therefore before one is given out banks run rigorous self-credit checks. Before applying for a mortgage, it is highly advised to check your SCHUFA information.
Picture Source: Adobe Stock, ID 256401973