Credit check

Credit Check - A credit check is an assessment of an individual’s or a company’s creditworthiness and ability to pay. In the real estate sector, banks conduct credit checks before granting a loan, and landlords do so before signing a lease. The check includes proof of income, a credit report, existing liabilities, and financial circumstances. A positive credit check is a prerequisite for loan approval and influences interest rates.

Credit Check in Real Estate Financing

Banks assess creditworthiness based on several criteria:

• Income situation: Pay stubs from the last three months, income tax returns, and for self-employed individuals, business performance reports and balance sheets from the last two to three years
• SCHUFA score: The score (0-100%, with higher values being better) summarizes credit history-negative entries (payment demands, debt collection, insolvency) significantly lower the score
• Existing Liabilities: Outstanding loans, lease agreements, alimony obligations, and guarantees are deducted from debt-service capacity
• Equity: Amount and source of equity (savings, securities, home savings contracts, gifts)
• Employment status: Permanent employment is preferred; civil servants receive top ratings; self-employed and freelance workers must provide more proof

The bank calculates debt service capacity: The disposable income after deducting all living expenses and existing obligations must cover the monthly loan payment with a safety buffer.

Credit Check for Renters

Landlords may and should check the creditworthiness of potential tenants:

• Tenant self-disclosure: Voluntary information regarding income, employer, and rental arrears
• SCHUFA credit report: The tenant can submit a consumer credit report (free once a year via meineschufa.de)
• Proof of income: Pay stubs or income tax return - rent should not exceed 30-35% of net income
• Certificate of no rent arrears: Confirmation from the previous landlord that there are no outstanding rent payments

Scoring models and their limitations

SCHUFA and other credit bureaus use statistical scoring models that calculate, based on historical data, the probability that a person will meet their financial obligations on time. These models have strengths-they are fast and comparable-but also limitations: New immigrants, self-employed individuals in the start-up phase, or people with little credit history are often rated lower by standard scores, even though they are creditworthy. Anyone facing a low score should first request a free credit report and have any incorrect entries corrected.

Typical Credit Check for Real Estate Financing - Documents at a Glance

Document Category	Document	Time Period
Proof of Income (Employees)	Pay stubs	Last 3 months
Proof of Income (Self-Employed)	Business assessment, income tax assessment, balance sheets	Last 2-3 years
Tax Records	Income tax assessment	Last 2 years
Credit report	Consumer credit report or bank credit report	Current
Proof of equity	Bank statements, securities account statement, home savings contract	Current
Existing liabilities	Loan agreements, lease agreements	Current
Property documents	Land registry extract, floor plan, living space calculation	Current
Rental income (for investment properties)	Lease agreement + operating cost statement	Current

Practical tip for property owners in Nuremberg and Franconia

We recommend that landlords in the Nuremberg metropolitan area take a systematic approach to tenant selection: a tenant self-disclosure form, SCHUFA credit report, and proof of income constitute the minimum screening requirements. The rule of thumb “base rent should not exceed one-third of net income” helps protect against rent defaults. Under data protection laws, you may only request these documents from the shortlist of applicants (after a viewing), not from all interested parties. The housing market in Nuremberg is tight-if there are several equally qualified applicants, we recommend objectively comparing creditworthiness and documenting the decision in writing to counter potential allegations of discrimination.

Frequently Asked Questions

What is a good SCHUFA score?

A SCHUFA score of 97.5% or higher is considered very good and indicates a minimal risk of default. Scores between 95% and 97.5% are good; below that, the risk increases. A score below 90% makes it significantly more difficult to obtain credit. The score is based on payment history, number of loans, loan terms, and any negative entries. Important: The score is not an absolute guarantee-even people with a very good score can run into payment difficulties, for example due to job loss or divorce.

Can I improve my creditworthiness?

Yes-by paying all bills on time, reducing outstanding loans, canceling unused credit cards, and correcting erroneous SCHUFA entries. Before applying for a mortgage, we recommend checking your own SCHUFA report and having any incorrect entries corrected-this can take several weeks, but it’s worth it if it leads to better loan terms. Long-term job stability and building up equity also improve your creditworthiness in the long run.

Can a landlord request a SCHUFA credit report?

A landlord may ask the tenant for a self-reported SCHUFA credit report, but may not request it directly from SCHUFA on their own. Submission is voluntary-however, the landlord may interpret a refusal as a negative signal. Under data protection law, a consumer credit report (without a detailed credit history), which the tenant obtains directly from SCHUFA, is sufficient. In Nuremberg, where the housing market is competitive, it is common for applicants to proactively submit a SCHUFA credit report-this significantly strengthens their application.

Landlords with multiple applicants for an apartment in Nuremberg should conduct credit checks in a standardized and documented manner-this protects against potential challenges to the rejection and strengthens legal safeguards in tenant selection.

What specific requirements do banks have when financing a multi-unit residential building?

When financing multi-unit residential buildings as an investment, banks assess the property’s quality in addition to the applicant’s personal creditworthiness: rental income, vacancy rate, condition, and location are all factored into the evaluation. The loan decision is based on the property’s mortgage lending value, which is typically set at 10-20% below the purchase price. Self-employed individuals and freelancers seeking to finance a multi-family home face particularly strict documentation requirements: balance sheets and income tax assessments for the past three years, a current business analysis, and proof of stable business profits are minimum requirements. Self-employed individuals in Nuremberg who wish to finance a capital investment should consult a financial advisor specializing in financing for the self-employed at an early stage-as requirements vary significantly from bank to bank.

Credit Check and Data Protection: What Landlords Must Consider

The credit check during tenant selection affects applicants’ right to informational self-determination. Landlords may only collect information necessary to assess financial solvency. Questions regarding illnesses, pregnancies, political beliefs, or religion are prohibited and may lead to claims for damages. The credit data collected may be used exclusively for tenant selection and must be deleted upon completion of the selection process. In Nuremberg, we recommend that landlords use a standardized application form containing only legally permissible questions and apply the same screening process to all applicants. A uniform, documented process protects against allegations of discrimination and facilitates decision-making when there are multiple equally qualified applicants.

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