German Mortgage Glossary
SCHUFA is a credit rating agency which rates you with a credit score as an indication of your creditworthiness. Banks will check your creditworthiness using your credit score at SCHUFA.
SCHUFA does not divulge their credit scoring method. But you can be assured that they check whether you pay all your bills on time. Also outstanding installment loan balances (auto loans, student loans) are not a good thing, as are too many credit cards.
You may want to obtain (paid) access to the data SCHUFA maintains on you (through meineSCHUFA kompakt), so you can check if there are any errors.