Extraordinary effort needed to ensure stakeholders fully grasp the Credit Bureau’s concepts

Aug 12, 2019 Letters

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DEAR EDITOR,
In keeping with Creditinfo’s thrust to expand its efforts at enhancing public awareness regarding its mandate, functions and importance – an issue that is relevant for consumers and stakeholders alike, kindly permit me space in your column to provide a further update on some important issues that should be of interest to the public at large, including consumers and businesses, particularly at this juncture when Guyana is poised for explosive growth.
It is therefore expected that via our ongoing public engagement initiatives we will be able to enhance and contribute to financial inclusion by: Improving consumer and SME financial literacy; reducing over-indebtedness; encouraging responsible borrowing; helping SMEs and individuals build up a credit profile based on their “reputational collateral”; helping lenders expand markets to unserved SMEs and individuals and in general contribute to responsible lending.
We would have recognised over the course of the past six (6) years that the operations of a credit bureau demand extraordinary effort to ensure that stakeholders fully grasp its concepts and appreciate the implications.    I therefore trust that the general public as well as our stakeholders and partners would be duly enlightened and develop a full appreciation of the responsibility of all parties in the credit reporting process.  We would also welcome direct engagements in person or via telephone, our website or social media platform.
As a means of establishing context, I wish to make reference to a matter that was recently highlighted in the media by a customer and to utilise this experience as an opportunity to provide clarification on the key issues to be noted particularly by consumers with respect to the new and growing credit reporting industry in Guyana.  The subject of his discontent surrounded:
1. the lack of a credit score on his credit report in spite of his previous borrowing record
2. the composition and sufficiency of the CI database and the lack of efforts being made in this regard
3. the competency of the CI Staff as well as the opulence of the facilities within which the operations are housed
The following is a summarised version of our internal report on the matter:
On May 20, 2019, customer visited the local office and requested a copy of his personal credit report. He was told of the requirements for this report and upon completion of the required procedures a report was generated and given.  Soon after receiving the report, he informed the receptionist of some perceived inaccuracies which he saw on the report. He was then advised that the process of addressing those issues requires the filing of a dispute using a dispute form. This he refused and angrily left the office.
On May 21, 2019, it was brought to our attention that a letter was written in a popular newspaper highlighting several complaints including the lack of a score on his credit report in spite of having a number of current loans as well as his displeasure with the service. This was subsequently followed by threatening emails and indicating plans to directly contact the Regulator if the report is not updated as he believes it should.  The customer was once again informed of the need to visit the local office to file a dispute which is the ONLY recourse that would allow Creditinfo to legally address the issue on his behalf.
On June 3, 2019, the customer visited the office to file his dispute. At that time, an indepth interview was conducted and it was determined that the customer was incorrect in his statements.  After checking with the two financial institutions mentioned, in the customer’s presence, it was determined that the loans mentioned as opened were actually attached to his business and hence could not be linked to his personal credit report as expected.
It must be noted that at no time in the initial engagement did the customer indicate that he has a business or is interested in the credit report for that company prior to filing the dispute.  If he had, certainly the credit report for that entity would have been generated and certainly any perceived ‘missing data’ would have been seen.
Following the engagement with our staff the customer eventually filed the dispute to allow for the requisite action to be taken i.e. to have the identified loans moved from his personal report to his business account.   We were however advised that was not possible as the institution indicated that the documents presented were all legally associated with the person and not the company.  The dispute was therefore resolved as a false dispute and the matter closed.
Following are some very important points to note from this scenario:
1. Customers are responsible for verifying the accuracy of the data sent to the credit bureau by accessing their credit reports.
2. The law provides for consumers to access a free credit report once annually.  Additional reports can be obtained as often as desired for a small fee
3. Upon observing any inconsistencies in a credit report, a customer should file a dispute with the Bureau as this is the only authority by which Creditinfo can act to rectify any erroneous information.  However, it must be noted that false disputes will negatively affect one’s credit score.
4. Creditinfo is not a data provider.  All correct and incorrect information on a credit report is supplied by the respective data provider.
5. Creditinfo does not police the data sent by data providers who are bound under law to ensure data supplied is accurate.
6. There is a very complex and comprehensive mechanism that informs the calculation of the credit score that is a reflection of the customers’ borrowing behaviour.
 THE CREDIT SCORE EXPLAINED
A full credit report comprises a score which is a numerical representation of all the information contained in a credit report; a profile of payments related to all facilities taken, as well as other credit related information which provides comprehensive insight to lenders on a borrower’s credit profile including previous payment behaviour patterns.
The credit score is a numerical calculation intended to represent the specific level of risk that a person or entity brings to a particular transaction.  Credit scores are calculated by the application of advanced algorithms or statistical formulas to the information contained in a credit report at a particular moment in time.  Credit scoring models assign statistical weights to certain types of data such as outstanding balance to available credit ratios and number of late payments and utilising mathematical algorithms produce simple three – digit numerical score.   In utilising this score, lenders set their own levels above which a credit application will be approved and below which it will be rejected.  The credit score therefore provides a neutral and objective measure for lenders to use in their credit decision making process by helping to predict specific consumer behaviours, such as the likelihood of default or repayment.
The calculation of a credit score is also guided by: (a) how serious are any missed payments, (b) how often are payments missed, and (c) how long ago were the credit related events on the data subject’s account.   In the Creditinfo experience, the lack of a score on a credit report could be an indicator of the newness of a facility as well as the lack of recorded credit activity on a contract for any number of reasons resulting in a ‘thin credit file’.
The issue of the recency of credit related events on a data subject’s account is a key determinant of the existence of a credit score at any point of time. [A data subject is an individual or business on whom lenders wish to assess the risk of default and non-payment before approving credit].   In the absence of recent credit information, while historical information and scores may be available,  this is scientifically not predictive i.e. a data subject’s distant past behaviour, say five (5) years ago, is not necessarily indicative of that individual’s current conduct.  Hence, that individual should not be penalized by the use of this information which is not likely a fair representation of their current credit profile and will likely create bias in their assessment.
Credit scoring is considered to be one of the most important innovations in the credit reporting industry and offers multiple benefits at every level of the economy. Credit score is a numerical expression based on a level analysis of an individual’s credit history, to represent the creditworthiness of an individual i.e. the statistical probability of default on any future financial obligation. The Creditinfo Score, which has been customised to the Guyana market based on observable trends and patterns evident in the data, falls within a range of 250 and 900. The higher the score, the lower the risk.  But no score says whether a specific individual will be a “good” or “bad” customer as each lender has its own strategy, including the level of risk it finds acceptable for a given credit product.  Note, the credit score itself does not determine a lending decision but rather enables the credit provider to make an informed decision about whether or not to lend.  In actuality, the credit score has made lending decisions faster [in a matter of hours or minutes rather than days or weeks] and also more equitable and objective.  The use of credit scoring also enables lenders to extend credit to historically underserved areas.   In addition to speed and convenience, scoring also makes the cost of extending credit lower.
As the information in the credit report changes, so will any new credit score based on your credit report. So your Creditinfo Score from a month ago is not likely to be the same score a lender would get from the credit bureau today.
It cannot be overemphasised that this process is fully driven by data and therefore the necessity for data submission by all subscribers.
DATA QUALITY
One critical aspect of the governing credit reporting legislation mandates Creditinfo to ensure that the data in its database is as accurate as possible.  The company therefore takes its obligations to data quality very seriously.  Since its establishment in 2013 no expense has been spared in this regard and with the co-operation of subscribing credit information providers has to date developed a reasonably sufficient database allowing for a current hit rate of over 85% – among the highest in the company’s operations in the region.  The ‘hit rate’ is the percentage of searches within the credit bureau database for which credit information is found.
Because comprehensive reporting increases a lender’s ability to recognize borrowers for responsible or ineffective use of credit, it correspondingly gives lenders a greater appreciation of the importance of excellent data quality.
Notwithstanding, data quality continues to be an issue that requires constant attention by all stakeholders.  While Creditinfo maintains the database, the primary sources of data are credit information providers from whom data is gathered on a monthly basis.  Institutions are then mandated to ensure that the information supplied is of the highest quality and its integrity unquestionable in accordance with Section 14 of the Credit Reporting Act.
Additionally, the importance and principal obligation of the data subject [consumer] in ensuring that the data being held in the credit bureau database accurately reflects his/her credit history i.e. the pattern of their borrowing behaviour, cannot be overemphasized.  In order to prevent errors in the credit report, every Guyanese is entitled to review a free credit report once every year.  The best way to identify potential errors that could be impacting your overall score is also to have regular review on your credit reports.  If any inaccuracy is detected, the appropriate actions to resolve this are facilitated through our Dispute Process.
Only in an ideal world can there be a ‘perfect’ credit bureau database.   Additionally, a credit score depends on data [both traditional and non-traditional data] and good quality data uploaded by ALL lenders to the credit bureau database. So, in the case of Guyana this would be:
· All lenders are uploading data of excellent quality
· All holders of non-traditional data upload data to the credit bureau database
· All data subjects [individuals and businesses] are identified by a unique identification such as the taxpayer identification number or
· The tin database is linked with the Creditinfo database to provide unique identification for all data subjects – and this presupposes that every borrower has a valid TIN
In reality, the symbiotic relationship between Creditinfo and potential subscribers is established by mutual agreement and hence it is only those entities that understand and appreciate the value of applying modern risk management practices and are willing to subscribe to the services will commit to the engagement.
Also, the process of sharing data is a time consuming one and hence credit information providers are required to make a serious commitment as well as assign resources to this process.  Therefore, the time taken to commence data sharing rests mainly with the data provider often at their sole discretion, legislation notwithstanding! For example, in our local experience, it took one established financial institution in excess of five years to complete the data submission process – with the implication of consumers being denied the benefit of their good credit history.
CONSUMERS’ OBLIGATIONS
Section 25 of the Credit Reporting Act accords data subjects the right to ‘check their own credit history as well as to correct erroneous information’.  In the event that the information is deemed incorrect, the data subject is obligated, in accordance with Section 28 of the CRA, to file a dispute with the credit bureau outlining details of the inaccuracy.  It is only with the written submission of a dispute that redress could be granted in these circumstances.  Once the information is corrected a free credit report is then issued with the updated information.  Failure to file a dispute will result in the inaccurate information being perpetuated on the credit report and may result in the data subject’s inability to access credit.
Creditinfo is therefore urging data subjects [individuals], especially those who may be unable to visit our offices, to utilise the new online facility at www.creditinfo.gy to access their annual free credit report.   The company has collaborated with GTT through its Mobile Money facility to allow countrywide access by individuals to: (a) their advanced credit reports which contain information beyond the free credit report, (b) multiple credit reports, and (c) monitor their credit profile.  Payments for these facilities can be made via the mobile money medium.
It must be noted here that the responsibility for data accuracy rests with all stakeholders: the credit reporting service provider, data providers as well as the data subject.  Even though it’s in the best interest of lenders and credit bureau to maintain accurate records, sometimes errors do happen. Variations in the information could be attributed to ordinary factors such as data entry errors.
Creditinfo, as the credit reporting service provider, therefore continues to support data providers through its recently launched Data Quality Index and Score.  The company also facilitates data subjects’ queries at its office on a daily basis and more recently online via its website. The online facility also provides for the option of monitoring of activities on credit reports.
Creditinfo, a global credit bureau represented in twenty-four (24) markets, was granted the licence in 2013 to operate Guyana’s first credit bureau with the intention of deepening the financial sector through the establishment of a Credit Reporting Industry.
The company’s operation in Guyana was the second to be established in the Caribbean Region at the time and is now one of three (3) fully established and a fourth pending in the OECS.  Its key partners and supporters in the development of credit bureau operations consist of prominent international organisations such as the World Bank and the International Financial Corporation (IFC).  Our standards and certificates include ISO 9001 and ISO 27001 for Quality Management and Information Security respectively.
Yours faithfully,
Judy Semple-Joseph
Chief Executive Officer

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