These Criteria Affect Your Creditworthiness

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Julia Ptock

May 27, 2021
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Anyone who wants to get a mortgage in Germany must be creditworthy. But what does that mean? This article explains what is important in a credit check for buying real estate in Germany, what criteria the banks use, and what role SCHUFA plays in this.

Creditworthiness: What does it mean? 

Buying real estate is almost always accompanied by taking out a mortgage. And anyone who wants to take out a loan must be creditworthy. This means that the lender - i.e. the bank - checks your application for a loan against certain guidelines. If the bank concludes that it will receive its money back on time and in full, nothing stands in the way of financing.  

In other words, you are creditworthy for a bank if you can repay the mortgage. The better your credit rating, the higher the probability of obtaining financing with favorable interest rates. If your credit score is not so good, you may face higher interest rates or, in the worst case, a rejection of your financing request. 

The decision criteria of the bank in financing a property

In Germany, the German Banking Act (Kreditwesengesetz - KWG) requires banks and savings banks to check consumers' creditworthiness before granting them loans. To this purpose, the banks have internal specifications and guidelines based on which they check the creditworthiness of the applicant. These can vary from institution to institution. 

To check your creditworthiness, the bank obtains information - on the one hand from you and on the other hand from external credit agencies such as SCHUFA (which we will discuss in detail in the second part of this text).

But what exactly are the criteria that banks now use to determine your creditworthiness?

1. Income, assets, and equity

Banks naturally want to know about your financial situation. Therefore, detailed proof of your income and financial situation is indispensable. This includes, among other things, your salary statements for the last three months, payments from pensions and, other sources of income, for example from rental agreements if you already rent out a property. Assets, for example, in the form of shares or real estate, also positively affect your credit rating with the bank. 

The equity you contribute to the financing also plays an important role. It is important that you can pay at least the additional purchase costs, consisting of land transfer tax, notary and land registry costs, and any broker's commission, with your savings. 

It is often said that at least 20 percent of the real estate purchase price must be contributed as equity in the financing. However, this is not true. Banks are quite prepared to finance 100 percent of the value of the property if the credit rating is impeccable and the income situation is secure.  

2. Age, marital status, and children

In addition to your financial situation, your personal situation also plays a role in determining whether the bank considers you creditworthy. 

As far as age is concerned, the basic requirement is that you must be at least 18 years old. If you are younger, you are not eligible for credit. People who are already 50 or 60 often have a harder time getting financing. However, with a high income and more equity, solutions can be found for such constellations as well. Important to know: The older you are, the higher the annual repayment rate and the lower the loan amount.

In terms of marital status, buyers who are married or living in a partnership have good chances, as two incomes can be included in the financing. But singles with good incomes usually have no problems getting financing either. The situation is also different when children are involved. Because they cost money, which is then missing for the repayment of the real estate loan. 

3. Employment relationship

For many banks, your occupation and industry, as well as the length of your employment, also play a role in evaluating your creditworthiness. The longer you have been employed, the better your chances of getting a mortgage. If, on the other hand, you are still in your probationary period, this can hurt your credit rating. Some banks generally exclude mortgages during the probationary period, while others will finance you anyway. The same applies to fixed-term employment contracts.

4. The property

In addition to your financial and personal situation, the property to be purchased itself also plays a role in assessing your creditworthiness. 

Banks use valuation software to calculate the mortgage lending value of a property. Factors that influence the value include age, current condition, equipment features, and the location of the property. The mortgage lending value usually corresponds to the sustainable sales value that the bank can achieve at any time from the proceeds of the property, even with possible discounts. How high the lending limit ultimately turns out to depend to a large extent on the credit institution and its conditions.

As you can see, banks apply a range of criteria when assessing an applicant's creditworthiness. If you want to know what your chances are of getting a mortgage for your dream property, our financing experts will be happy to help you. At Hypofriend, we combine years of experience with our superior technology. We predict banking decisions, analyze your optimal financial strategy, and our financial experts guide you through the entire process. Our goal is to secure you the optimal financing that fits your financial as well as your personal situation.

After talking about banks' decision-making criteria for mortgages, the second part of the article will focus on SCHUFA. Germany's largest credit agency plays an important role in the granting of loans and the bank's assessment of creditworthiness.

The role of SCHUFA in determining creditworthiness

SCHUFA AG (short for: Schutzgemeinschaft für allgemeine Kreditsicherung) collects all data on your payment history. The main focus is on whether you have always been able to pay your contracts or loans on time or whether there have been any irregularities in repayments. Furthermore, SCHUFA also stores information on existing or already concluded loans as well as on current contracts and bank accounts.

From this data, SCHUFA calculates an individual value on payment behavior, the so-called “SCHUFA-Basisscore”. In addition to this score, special industry scores are also calculated, including for banks and mortgage transactions.  

If you wonder how SCHUFA calculates the “Basisscore” and the industry scores, we are sorry to disappoint you. The calculation formula is a company secret and does not have to be disclosed. However, the calculation includes personal data (age, gender, etc.) as well as information about past and current credit transactions. Your place of residence, income, or profession, on the other hand, has no influence. 

What is the significance of the “SCHUFA-Basisscore”?

Even though the value of the base score is calculated individually, the scoring reflects the non-payment risk of groups of people, not the specific payment behavior of individual consumers. The base score is recalculated every three months and provides a percentage value between 0 and 100.  

SCHUFA Basisscore Table eng

In addition to the “Basisscore”, there are also so-called industry scores, including one for banks, savings banks, cooperative banks, and mortgage businesses. These scores may differ from the basic score. This is understandable insofar as the assessment of risks for payments on account in retail must be evaluated differently than those for a real estate loan.

The mortgage business industry score plays an important role - as the name suggests - in the granting of mortgage loans. Unlike the basic score, it is expressed in points. The scale ranges from 0 to 999 points. The higher the score, the lower the default risk for the bank. SCHUFA has introduced rating levels from A to M, with the risk ratio being lowest in level A at 0.17 percent and highest in level M at 20.55 percent. 

The score indicates the probability of non-payment occurring within the next 15 months.

SCHUFA Business Score mortgage table eng

Is getting a mortgage with negative SCHUFA a problem?

If the SCHUFA is negative and there is a negative entry in the SCHUFA file, it becomes difficult with a mortgage, but not impossible. However, the choice of lenders becomes smaller because only a few banks offer financing to prospective buyers with a negative SCHUFA.  

Good to know: Not all negative entries at SCHUFA are equally bad. An unpaid cell phone bill for 50 euros is less serious than legal collecting proceedings or the threat of foreclosure.

You must be aware that you will most likely have to meet certain requirements to obtain a mortgage from the bank despite a negative SCHUFA. This includes, for example, that you have to bring a high amount of equity into the financing. If you can show an above-average household income, this also increases your chances of obtaining real estate financing.

The experienced Hypofriend financing advisors will be happy to explain to you in a personal conversation what you need to pay attention to and what you can do to fulfill your dream of owning your own home despite negative SCHUFA.

How does a SCHUFA entry happen?

For many people, a SCHUFA entry is always something negative. But that's not the case at all. A SCHUFA entry occurs, for example, when you sign a mobile phone contract, open an account or take out a mortgage. Such entries are positive SCHUFA entries. 

Negative SCHUFA entries occur when a person's payment behavior is unreliable. This is the case, for example, if installments are paid irregularly, late, or not at all. Anyone who has ever had to make a statutory declaration in lieu of an oath or against whom an enforcement order has been issued also has a negative SCHUFA entry. With such particularly negative SCHUFA entries, a mortgage is nearly impossible.

Are condition inquiries for mortgage stored at SCHUFA?

As soon as you or a financing advisor like Hypofriend submit a financing request to a German bank on your behalf, the bank forwards the request to SCHUFA. A distinction is made between two types: 

SCHUFA Kreditanfrage (Credit request)

A “Kreditanfrage” (credit request) is stored in your SCHUFA report for one year and is visible to third parties for ten days. This means that if several credit requests are made in succession, the respective banks can see these inquiries. Unfortunately, this has negative consequences for you. If several credit requests are reported to the credit agency in a short period, your score will drop. And that in turn can lead to your financing request being rejected.   

SCHUFA Konditionsanfrage (Condition request)

In addition to the credit request, there is also the so-called “Konditionsanfrage” (condition request). The condition request is also stored in your SCHUFA report for one year, but it is only visible to you and not to third parties such as banks. Accordingly, condition requests do not influence your score, they are SCHUFA-neutral. 

Schufa Credit request vs. Condition request eng

At Hypofriend, we make sure that a SCHUFA-neutral condition request is made when we pre-check your eligibility with our partner banks. A credit request is made only when you accept the financing offer of the bank binding. 

Which SCHUFA report is the right one for a mortgage? 

As mentioned above, the bank requests various documents from applicants to check their creditworthiness. This also includes the SCHUFA report. And this is where it gets a bit confusing because there are three different types of information, which we will present to you in more detail in a moment.

The important thing is: the purpose of the proof determines which information you need. data copy ("Datenkopie nach Art. 15 DSGVO")

The SCHUFA must send you the free data copy at least once a year upon request. It is primarily intended for personal use and should not be passed on to third parties. It will be sent to you by mail after you have ordered it on the SCHUFA website. This may take some time, so order your copy on time as it is the most insightful if you have any doubts about your credit.  

Especially if there are other interested parties for the apartment or house, you should submit the documents as soon as possible, and then you may want to use the next options.

2. SCHUFA credit report ("SCHUFA-BonitätsAuskunft")

The report, which is subject to a fee, consists of two components: the forgery-proof SCHUFA certificate and an overview of all the data stored about you at SCHUFA and various industry scores. The SCHUFA credit report costs a one-time fee of 29.95 euros and can either be ordered on the SCHUFA website or printed out at special SCHUFA terminals in Postbank branches. 

3. SCHUFA creditworthiness check ("meineSCHUFA kompakt/plus/premium")

SCHUFA also offers an online creditworthiness check. This is a paid subscription for which you have to register on the SCHUFA website. This digital SCHUFA credit check is not only the most expensive, but not even suitable for proving your creditworthiness to the bank. Reason: The data is only visible after login. 


The evaluation of creditworthiness by the bank when granting real estate loans is a complex and complicated procedure, but unfortunately, it is not possible without it. To ensure that the creditworthiness check goes quickly and smoothly, you can simply upload the documents to your account at Hypofriend. This way you can see at a glance whether all the important documents are there, and your advisor can check the documents for potential problems.

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Julia Ptock

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