Crowdfunded OpenSCHUFA Project Wants To Reverse-Engineer Germany's Main Credit-Scoring Algorithm

from the opening-the-black-boxes dept

We’ve just written about calls for a key legal communications system to be open-sourced as a way of re-building confidence in a project that has been plagued by problems. In many ways, it’s surprising that these moves aren’t more common. Without transparency, there can be little trust that a system is working as claimed. In the past this was just about software, but today there’s another aspect to the problem. As well as the code itself, there are the increasingly-complex algorithms, which the software implements. There is a growing realization that algorithms are ruling important parts of our lives without any public knowledge of how they work or make decisions about us. In Germany, for example, one of the most important algorithms determines a person’s SCHUFA credit rating: the name comes from an abbreviation of its German “Schutzorganisation für Allgemeine Kreditsicherung”, which means “Protection Agency for General Credit Security”. As a site called Algorithm Watch explains:

SCHUFA holds data on round about 70 million people in Germany. That’s nearly everyone in the country aged 18 or older. According to SCHUFA, nearly one in ten of these people living in Germany (some 7 million people) have negative entries in their record. That’s a lot!

SCHUFA gets its data from some 9,000 partners, such as banks and telecommunication companies. Incredibly, SCHUFA doesn’t believe it has a responsibility to check the accuracy of data it receives from its partners.

In addition, the algorithm used by SCHUFA to calculate credit scores is protected as a trade secret so no one knows how the algorithm works and whether there are errors or injustices built into the model or the software.

So basically, if you are an adult living in Germany, it’s a good chance your financial life is affected by a credit score produced by a multimillion euro private company using an automatic process that they do not have to explain and an algorithm based on data that nobody checks for inaccuracies.

A new crowd-sourced project called OpenSCHUFA aims to change that. It’s being run by Algorithm Watch and Open Knowledge Foundation Germany (full disclosure: I am an unpaid member of the Open Knowledge International Advisory Council). As well as asking people for monetary support, OpenSCHUFA wants German citizens to request a copy of their credit record, which they can obtain free of charge from SCHUFA. People can then send the main results — not the full record, and with identifiers removed — to OpenSCHUFA. The project will use the data to try to understand what real-life variables produce good and bad credit scores when fed into the SCHUFA system. Ultimately, the hope is that it will be possible to model, perhaps even reverse-engineer, the underlying algorithm.

This is an important attempt to pry open one of the major black boxes that are starting to rule our lives. Whether or not it manages to understand the SCHUFA algorithm, the exercise will provide useful experience for other projects to build on in the future. And if you are wondering whether it’s worth expending all this money and effort, look no further than SCHUFA’s response to the initiative, reported here by (original in German):

SCHUFA considers the project as clearly directed against the overarching interests of the economy, society and the world of business in Germany.

The fact that SCHUFA apparently doesn’t want people to know how its algorithm works is a pretty good reason for trying to find out.

Follow me @glynmoody on Twitter or, and +glynmoody on Google+

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Comments on “Crowdfunded OpenSCHUFA Project Wants To Reverse-Engineer Germany's Main Credit-Scoring Algorithm”

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Roger Strong (profile) says:

Reputation Gatekeepers

The Information Age started without the Industrial Age ending. While the Information Age hasn’t ended, I’ve seen a few comments here and there to the effect that we’ve now entered the Reputation Age.

The era of "fake news" made it necessary. Now the reputation of the news source is as important as the news. Credible citations are required.

But it’s not just debunking Trump’s "alternative facts", climate change denial or Alex Jones’ claims. Or the false claims about SESTA and Net Neutrality. Or the New York Times vs. Breitbart.

This story is about being a gatekeeper not for information, but for reputation. Credit scores are about reputation, and SCHUFA is the gatekeeper. OpenSCHUFA wants to change that.

Scientific journals are about reputation. There are many deservedly poor-reputation journals, but there are some that have cultivated a reputation so good that merely being published in them establishes a scientist’s reputation. And so Elsevier becomes a gatekeeper not just for papers, but for scientists’ reputations.

Would-be reputation gatekeepers have had some big misses. Reputation Management Consultants keep encountering the Streisand Effect and now the occasional angry judge. Facebook and Twitter have accidently taught everyone that a large number of followers does not equal a good reputation.

But they’re experimenting and learning. Politicians depend on reputation, so it’ll be easy to influence them to pass legislation helping to create gatekeepers. Its early days in the new age.

Anonymous Coward says:

Re: Reputation Gatekeepers

Now * the reputation of the news source is as important as the news.

Always was – what is said is secondary to who said it, because the latter allows you to infer why it was said, and this in turn shows a bigger picture.
Hell, even here – there are people like PaulT, ACs and outOfTheBlue, and boy, are they treated differently.

*Emphasis mine.

Anonymous Coward says:

I'll bet they find a surprise

I would say that there are better than even odds that the OpenSCHUFA project analysts will be scratching their heads due to unexplained variance after performing the best fit linear and nonlinear regressions on all the observed variables. And they will come to find that this variance represents undisclosed – and possibly illegal – data used in calculating the SCHUFA score. For example, information that comes from breaches of privacy or government records like medical history, employment records, ethnicity, religion, arrests, tickets, and tax information.

That will be a very interesting can of worms when opened, because Europeans value their privacy much more highly than us Americans.

Anonymous Coward says:

Re: I'll bet they find a surprise

information that comes from breaches of privacy or government records like medical history, employment records, ethnicity, religion, arrests, tickets, and tax information.

Highly unlikely. If it was true, the trainwreck that the SHUFA would create would be enormous. What was it – fine of 4% of yearly revenue?

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