Credit Ratings and You
If you’re reading personal finance blogs and/or searching for finance/money related articles on the net, then you’ve probably seen ads or spam for it.
Get a free credit report. Know your credit rating – or fix it, raise it, or whatever.
It is a government-owned and
controlled corporation that is envisioned to be the leading provider of
independent, reliable and accurate credit information in the
(You may remember that it was covered in ANC On The Money a while back, if you watch the show.)
So what the heck does that mean?
Well, currently when you try to loan from a bank, they’ll ask some financial info from you (part of the requirements you submit). If you have an account with them (and loans are approved faster and more easily if you do; at least that’s what I’m told), that’s taken into consideration too.
They’ll process it and you get approved for a certain amount at a certain interest rate. The more they think you are able to pay, the less onerous/harsh the loan terms are.
(Update: we have CMAP.
Banks use that to get your history of loans and credit cards. And
possibly other info their members can provide. The biggest difference is
that info is not available to the general public and info source is not
as side ranging. Thanks to +Ronald Cagape for the great info.)
Now that the Philippines will have it’s own credit bureau (around two years from now, if it goes according to plan), there’s a slight twist.
Banks may still request such information, however they will also rely on the information given to them by the CiC.
What the CiC will do is gather any credit-related information on you, like:
- If you skipped town and never paid your bank loan for the car you crashed and totaled, that goes on your record.
- If you pay your credit card on time, that’s on your record as well.
- If you forgot to pay that Php20 you borrowed from your friend during recess back in grade school – well, that’s probably not on record. But you get the point.
Right now the lending process is a little opaque. The bank won’t know much more than what you divulge. Pertinent info like:
- that you missed a lot of utility payments for a while (yep utility bills can be part of your credit profile),
- you haven’t paid that loan from the cooperative you joined,
or your old credit card was deep in debt, or you had a previous loan with a different bank that almost defaulted.(these info are available to them via CMAP)
In the current system, the lender probably won’t know that history.
That’s, of course, good for you. But in theory that could be bad for everyone – including you.
Without specific credit information, a “generic” approach will prevail.
Something like: since 20% of Filipinos don’t pay their loans (a very random, not-real-life example), and this old guy’s got so much money he’s in the top 20%, we should give him a loan. But that young guy with not much money probably shouldn’t get one.
But if they could determine that the old guy with a lot of money has a bad habit of forgetting to pay on time, and the young, poor guy has never missed any kind of payment in his young life, the lending process would be more “fair”.
That’s all in theory, of course.
In my next post, we’ll tackle some practical facts about the CiC and how it will operate, as well as their impact to ordinary people like us.
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