Scotiabank to use credit reports in retail lending soonest
Financial institutions are yet to begin the wholesale use of credit reports in the granting of loans because the Bank of Jamaica only recently gave new credit bureaus the green light to begin operations.
However, Scotiabank said it will be using such reports for personal and business purposes once the bureaus begin issuing the reports.
This means that consumers who wish to get loans for mortgages, motor vehicles and other credit facilities will find that their record of payment of old debts will be integrated into the bureaus' reports, which will either give high or low scores for creditworthiness.
Senior Vice-President for Credit Risk Management at Scotiabank, Monique French, said the "the credit bureaus have not yet begun to issue reports".
However, she told Sunday Business that "we expect the bureaus will begin to issue reports this year and Scotiabank intends to use credit reporting for both personal and business purposes, starting with credit reports being incorporated into its retail lending processes as a standard element".
First Global Bank and National Commercial Bank did not respond to queries about the extent to which they would also be using credit reports.
Hopeton Morrison, general manager of the St Thomas Cooperative Credit Union said that his institution has signed up with Bank of Jamaica-approved bureaus and would in future be making use of their services.
He said the credit union has run advertisements advising members that it would be providing the bureaus with information on request.
Terrence Cooper, chief executive officer of CRIF NM, one of the credit bureaus which are now operational, pointed out that because credit bureaus are new to Jamaica, credit information databases will take a little time to mature.
But he said that as they mature, credit scores will become more predictive and reflective of how Jamaicans manage their debt.
"The standard score range is typically from 300 to 900, with 300 being very bad and 900 being exceptionally good, which is rare," Cooper said, adding that "on average a good score is in the range of 625 to 750."
Credit scores are determined by a number of factors, all of which contribute in varying degrees to the total credit score.
Credit information is provided by banks, credit unions, building societies and everyone that extend loan facilities. They also include hire purchase and other retail stores.
Third-party information is also available from the courts, the Registrar General's Department and other government agencies. The bureaus are allowed to access credit information going as far back as seven years, Cooper said.
The CRIF NM official pointed out that what Jamaica has had up until now is a blacklist. "Now the full-service credit will provide both positive and negative data. Negative issues will remain on your report for seven years but the report will also show your improvement as you create a new history. One can repay outstanding monies at any time. A change in payment behaviour is viewed very highly by financial institutions," Cooper added.
Nine ways to improve your credit score
Terrence Cooper, CRIF NM CEO, recommends the following to consumers:
1. Get a copy of your personal credit report to see what it contains as there might be errors including outstanding payments for loans which are already closed. Your score is calculated based on the information in your credit report, so certain errors there can really cost you. Some bureaus will provide the first report for free.
2. Debts that have not been paid - bankruptcies/legal actions, and disputed balances will have the most detrimental effect on your credit score. These items must be dealt with and may take a while to reverse the negative impact on your score.
3. Pay your bills on time. If you have missed payments, get current and stay current.
4. Pay off debts and focus on bringing balances down.
5. Re-establish your credit history if you have had problems in the past. Opening one or two new accounts with small limits and paying them on time, will reflect positively on your credit profile.
6. Apply for and open new credit accounts only as needed. Avoid applying for credit unless you have a genuine need.
7. Keep credit cards but manage them responsibly. In general, having credit cards and instalment loans (and making timely payments) will favourably impact your credit score in the long term. If you are having trouble making ends meet, contact your creditors and try to consolidate multiple loans into one monthly payment.
8. Keep balances low on credit cards and other revolving credit. Keeping your account balances below 75 per cent of your available credit may also help your score.
9. If you have been a good customer, a lender might agree to simply erase late payments from your credit history. You usually have to make the request in writing.