Schufa is a credit rating agency in Germany. They give a credit score to German residents. If you have a good Schufa score, it's easier to find an apartment or get a loan. If you have a bad Schufa, some banks won't let you open a bank account.
When you apply for an apartment, you should include a Schufa Bonitätsauskunft (credit report) with your application. This document shows your credit score.