Debt Solutions

Credit reports are compiled and issued by the National Credit Bureau, which collects financial information on borrowers from financial institutions and houses it in a computerized database system, known as the Central Credit Reference Information System (CCRIS). 

The CCRIS automatically processes the credit data received and synthesizes it into credit reports, which are made available to financial institutions and individuals on request. 

A credit report contains personal and debt details over a 12-month period.  However, The Credit Bureau is not allowed to compile data on savings and other deposit account information. 

How do the banks use the credit reports?  A good solution is, when extending a credit facility a bank takes into account factors like the underwriting process and, the risk exposure it wants to take on a particular segment and more importantly the debt history of the borrower. 

When the banks extend loans, they look at the repayment capabilities, which include factors like gross income, disposable income and the amount used to service loan repayments.  This is where the credit report comes in.  With it, the banks are able to check a person's income against his total debts with all financial institutions.  By accessing the CCRIS, the banks can look at the individual's debt repayment history, which lists his total debt exposure and default track record. 

Credit reports are also accessed when banks want to increase the limit or give a 'top-up' facility to the customer based on his repayment history with the bank for that particular credit facility. 

Thus, banks are able to identify customers who are highly geared or in a dire situation, therefore banks should not help a customer over-extend himself as there will be a situation of over-borrowing and underpaying. 

Not only that, your credit report will indicate whether you're the guarantor of a loan and the amount guaranteed.  However, banks have the discretion to vary the treatment of guarantors. 

Moreover, credit reports not only bring to light current debts but also applications for credit made to financial institutions, which means those that are not yet approved are also shown.  This tells them that a person in debt may be in a crunch situation and it therefore raises a lot of other considerations.  If this is a priority customer, the underwriters will seek to know why he needs the money and how it is going to be utilized. 

In addition to your total debt exposure, credit reports also reflect the number of outstanding monthly payments on a credit facility.  

So, how do banks evaluate customers who are constantly behind on their payments?  A good solution, when reviewing a customer's credit history, is for the bank to use their own discretion.  However, if the late payments become a pattern over four to six months, there could be an underlying problem. 

Other information that may appear in a credit report are bankruptcy and others legal actions against the borrower.  However, bankers don't base their lending decisions solely on the credit reports.  

It's a fairly good solution but other contributing factors include the bank's knowledge of the customer, the quality of documentation he submits to the bank and underwriting tools like scorecards.