What banks can find out from consumers' credit reports
Singapore
CONSUMERS here have not found savvy ways to play with their credit scores - not yet, anyway, said William Lim, executive director of Credit Bureau Singapore.
In the US, some borrowers have, perversely, even tried to improve their credit score hit from rolling debt, by taking on more, but manageable debt, that they then pay off in time.
Most consumers here likely lack understanding about their credit reports. The bureau has received calls from consumers startled when their score is downgraded because they have accidentally missed a payment.
Over 13,000 credit reports are issued by Credit Bureau Singapore to consumers every month. These reports only reflect bank lending, but not lending by moneylenders. There are plans to set up a separate bureau for that.
Mr Lim noted that because information is given on a 12-month basis, banks can differentiate between a payment oversight and debt that is "distressed to the point of no return".
Banks can tell, from the credit reports, how much debts are secured or unsecured, and what lending is meant for medical bills, education, and renovation - categorised as loans that are "needs-based and purposeful". The report also monitors credit enquiries - one way to show how hungry a person is for debt - in real time. If a consumer makes three applications in succession in a single day, the second and third banks will see that trail, said Mr Lim.
For years now, borrowers can make use of promotional rates through a product called balance transfer to arbitrage on interest payments. Banks say they do not know if the money is being used to pay down existing debt. But they can check from credit reports if an applicant revolves debt frequently through this.
In Singapore, a default is a stain on one's credit record forever, only avoidable by negotiating a settlement. A default is likely an early warning of bankruptcy, which is also captured in the report and left there until five years after the date of discharge.
And with aggregated credit limits and outstanding balances available from the start of this month, as directed by regulation, banks will have a broader view of one's credit situation.
Still, a common misconception, said Mr Lim, is that the reports alone determine whether a consumer is eligible for a loan. For one thing, the bureau does not collect information about a consumer's income, so banks are the ones calculating the amount of debt a consumer can take as a proportion of their pay.
"We don't tell the lenders whether to lend," added Mr Lim, noting each bank has its specific credit policies.
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