You earn your money with data collection
Credit bureaus such as the Schufa sell estimates of the creditworthiness of companies and consumers. While data collectors defend their business model, critics repeatedly accuse them of dangerous practices.
“To lend money, it needs trust,” argues, for example, Schufa spokesman Ingo A. Koch. Without a credit check, the risk of default would rise, so that loans would be more expensive for everyone. After all, even private individuals could get information from Schufa: “For example, about the company that is to be commissioned to build the home.”
Storage duration is controversial
A negative rating from a credit bureau is a massive intervention, others say. “What worries us is the retention period of an entry,” explains lawyer Thomas Fein from Hanover. Even if a loan has been paid, the entry stops for three years. Only then does the legislature oblige the credit bureaus to delete them. “If you have argued with your mobile service provider and therefore have not paid installments, it may be that you will not get a real estate loan years later.”
Which data is used?
What credit agencies are allowed to save and what not, is regulated by the Federal Data Protection Act. “However, the guidelines are very vague,” criticizes Malte Engeler, who looks after the private sector at the Independent Center for Privacy Protection Schleswig-Holstein (USD). “There are no clear content-related criteria as to which data may be used.”
The Schufa declined to collect data on income, wealth, nationality, occupation, marital status or religion. “We only store credit-related information such as opened accounts, credit cards or payment problems,” emphasizes company spokesman Koch.
Scoring: How trustworthy are you?
From their data credit bureaus calculate the credit rating with a point system. These score values sell them to interested parties: “An information agency may issue the data if the requesting party has a legitimate interest”, explains Engeler the legal regulation. This is the case, for example, when a loan is at risk of default. However, the matter is only checked on the basis of random samples. “In practice, therefore, it comes to unauthorized inquiries, which then land with us privacy advocates.”
Many data can also be reported to credit bureaus without the consent of those affected. For example, companies may inform about a payment delay if they have not reacted to the second reminder. “Consumers should always respond to unauthorized claims,” advises lawyer Fein. Usually it is sufficient to contradict the invoice in writing by registered mail.
No account or credit without Schufa
Schufa’s data collection has another basis, the so-called Schufa clause: anyone opening an account or concluding a loan transaction must agree to the disclosure of their data. Unlike its competitors, Schufa therefore seldom needs to use address data to estimate creditworthiness. How exactly the score is calculated, however, is a trade secret: “We only disclose our formula to the supervisory authorities,” explains Koch. Critics do not go far enough: “We demand greater transparency on how score values are achieved,” says Engeler.
Bad Schufa value as protection?
One thing Schufa spokesman Koch then reveals: “Repaid or current loans, which are regularly served, are not negative features.” A large part of the Schufa entries is therefore harmless. Those who already have payment difficulties will be protected from further over-indebtedness by the Schufa rating.
Lawyer Fein contradicts this presentation: “Sometimes the score value also goes down with certain behavior, for example when a consumer at several banks at the same time for a loan request.” Even if many small loans were taken or the person involved has several credit cards, this can be bad for the credit rating. “What makes me angry is that we can only speculate about the creation of the Schufa value,” criticized the lawyer.
What to do about contentious entries?
What can consumers do who disagree with their score? “Who suspects disagreements, can turn to the consumer service of Schufa,” says Koch. If there are further doubts, the independent ombudsman of the Schufa checks whether an entry needs to be corrected or deleted. Last year, there were only 18 cases requiring correction, emphasizes the company spokesman. “There are often false small entries that trigger litigation,” says Fein. It makes sense not to act against the Schufa, but against the company that made the entry.
Free self-assessment once a year
Every citizen has the right to know what data is stored about him, explains Engeler. The Schufa also sends a free data overview once a year on request. For passing on to third parties this is not suitable, but there is the fee-based credit information: “One should never give his future landlord the full self-assessment,” warns the privacy advocates. “There is a lot more in there than this one needs to know.”