Legal Scoop | Credit reporting the new norm
Up to five years ago, I would listen to my family members and associates in North America lament about how important their having a healthy credit score was to the quality of their livelihood and feel secretly relieved that this was not an issue in Jamaica. Six years after the passage of the Credit Reporting Act (the act) in Jamaica, however, this is no longer a truism. Having a good credit score is now an inescapable prerequisite to accessing credit in Jamaica.
ACCESS TO CREDIT
For some time now, Jamaicans applying for loans from the major commercial banks, including NCB, BNS and FGB, have had their credit score checked as a precondition to them obtaining the loans sought. The same is true for obtaining a mortgage at building societies, including VMBS and Scotia Jamaica Building Society. I have personally done business in the past two years or so with the financial institutions named in this paragraph and so can refer to them based on my own personal experience; however, based on the information of clients and associates, the practice is now pervasive and extends far beyond the aforementioned financial institutions.
DENIAL OF CREDIT
Some financial institutions in Jamaica are now adopting a very strict approach to credit scores and will deny a credit facility once an applicant's credit report is not satisfactory. Others are, however, more flexible and will use the report as one factor only, in an overall assessment of the loan applicant.
In one case I heard of from a banking loan officer, a couple approached the bank in question to access a credit facility using the security of their jointly held home. When their credit reports were accessed, the wife's report was satisfactory; however, the husband's report showed that he had defaulted on a credit card facility some years ago while he was a student. This financial institution had a very strict policy regarding credit reports, and although the default had happened many years before, the loan was denied.
In another scenario, a loan was denied to a couple, again, because the husband had a blemish in his credit report. What is interesting about this case was that the financial institution which turned the couple down had done business with them on diverse occasions in the past and had been repaid early each time. In fact, the couple often received pre-approved loan offers through the mail from the same institution because of their early payment record. However, when the couple approached the financial institution for a loan in 2015, as they had previously done in the past, the application was denied because the vetting system now required that their credit reports be pulled. When their reports were pulled, it revealed that the husband had been reported by another competing financial institution for taking long to settle a credit card debt several years before. Although the husband explained that the delay in settling the credit card debt had been through inadvertence, and although the credit card debt had been settled fully for some time, by the time the couple was seeking this new loan, the information was still on the husband's credit report and the loan facility was not granted.
In yet another case shared with the writer, a lady was denied a mortgage because she had guaranteed a loan for someone and that person had defaulted. Although the lady had been repaying the loan in question, when she applied for the mortgage, her credit report, when pulled, revealed that her repayment pattern had not been consistent. The mortgage facility was, therefore, denied and the lady had to cancel the agreement she had entered into to purchase a house.
There are two credit bureaus in Jamaica, both of which are relied on by the major financial institutions when processing loan applications. They are: Credit Info, located on the Towers, Dominica Drive; and CRIF NM Credit Assure Limited, located in the Winchester Business Centre. The two bureaus compile data sent to them by financial institutions going back years and use that information to generate a credit report and score for each person whose name appears in their database.
FREE CREDIT REPORT
Under the act, each citizen of Jamaica is entitled to one free credit report each year. Thereafter, a subsequent copy of the report in the same year will have to be paid for. It is very important that we all take advantage of the opportunity to obtain the one free credit report to which we are entitled each year, as from my own personal knowledge, the information in the reports is sometimes incorrect and may need to be challenged.
Fortunately, the process of challenging the report is not difficult. Both bureaus have systems in place to record queries/disputes, and follow up with the financial institutions which submitted the original information for responses. If after consulting with the financial institution which provided the original information the bureau is satisfied that the challenge had merit, the offending credit report will be updated. The difficulty, however, is that the period of time between the query/challenge being lodged and the report being updated can encompass weeks, which may be critical time lost when one is trying to access a particular loan facility quickly.
With credit reporting now an important part of the tapestry of Jamaican life, it is important that readers be alert about their credit information. I recently found out that a credit card payment I had made had been inadvertently applied to another person's account with a similar name. Before this credit reporting clime, given that the funds were eventually credited to my account, I would have dropped the issue. However, given the new dispensation we are now living in, it became very important to me to be assured by the bank that the documentation it had generated with respect to the particular payment (which they share with the credit bureaus) would be rectified to show that the payment in question was, in fact, made two weeks before the error was picked up and, therefore, was NOT LATE. We must bear in mind that it is not only the absence of payments which contribute to poor credit reports, late payments also do that.
I strongly encourage any adult who has never received a credit report to call up the local credit bureaus on Monday and arrange to get a free copy. Once received, review your report carefully. If you do not understand it, seek guidance from the folks at the bureau, but do not leave it there either. You should also take the report to your favourite financial institution and have a customer service representative go through it with you. Ask him/her to advise you, especially on areas that may prevent you accessing credit in the future. Happy hunting!
- Shena Stubbs is an attorney-at-law and legal commentator. Send feedback to: Email: email@example.com; Twitter:@shenastubbs