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Launch of iReport online
With the launch of iReport to the general public via online, the Credit Information Bureau of Sri Lanka (CRIB) has created another milestone. iReport refers to your own credit report which can now be obtained by you online even though this service was available through the CRIB and shareholder lending institutions since 2009.
CRIB was established in 1990 and was the first credit bureau in the South Asia region initiated by the Central Bank of Sri Lanka and the Ministry of Finance as a response to the 1980s debt crisis in the country.
CRIB provides credit information on request to shareholder lending institutions and simultaneously to the borrowers to whom such information relates, thereby instilling credit discipline in the finance sector.
Why is your credit report important?
Your credit report will be your passport to financial success as lending institutions are increasingly dependent on your CRIB report, which gives a wide array of information about your financial discipline.
In fact most of the high net worth (HNW) individuals today were not born with a silver spoon in their mouths but got to that position through hard and dedicated work coupled with proper funding from lending institutions. They have used these funds effectively and repaid on the dot, which has resulted in them having excellent credit records. With a mere glance over their CRIB reports, lending institutions will not be afraid to lend to them even though there is no documentary evidence to prove their repayment capacity.
Your credit report is a record of your credit repayment history compiled from different credit providers. As most lenders will check your credit information to assess your credit worthiness prior to making a decision, a good repayment history will make it easier for you to obtain credit faster and at concessionary rates.
To date there are over 3.9 million records in CRIB and borrowers are advised to look at their own records now and then so that they are conversant with their own records. The iReport will give a borrower the following data which will not be given to lending institutions in addition to the data given to a lending institution:
Employment details: Use the same uniformity as in the name when you give details to lending institutions. Give the designation and company name in the identical fashion to all lending institutions. Don’t change jobs frequently as a large number of employment records will look bad unless you are a director of a large number of companies.
Details of credit facilities
This data of a CRIB report is the most important aspect of a credit decision by a lending institute. The points discussed below to improve your credit profile are in the sequence of records in a CRIB report accessed by a lending institution with regard to a borrower.
Summary of potential and current liabilities (excluding settlements)
This gives the total number of facilities in force in your name and as a borrower and as a guarantor, the original amount granted and the outstanding as at date. The outstanding is always expected to be lower than the facilities granted as the reduction of facilities over a period is expected. However, if a temporary facility is in place and the limit has not been marked in the system, this might not necessarily happen. Therefore it is always advisable to discuss with your lending institution beforehand and arrange a temporary limit to be marked so that an excess over the granted amounts will not be reflected at any given time. This will also reflect your financial discipline to proactively arrange limits for any contingencies.
However, as a borrower you can stick to these patterns as you are in charge of your own finances. The issues start when you guarantee others, which also appear in the CRIB report. That’s why we advise you not to put your valuable signature to guarantee another person unless you are very sure that his financial discipline is better than yours. I have come across excellent businessmen losing their reputation by guaranteeing others and going bankrupt. Don’t sign guarantees for empathy as no one will have empathy for you when things go bad!
Status of credit facilities at a glance (excluding settlements), number of
days in arrears
This will give the number of days overdue of the facilities as a borrower in the ranges of 0, 1-30 days, 31 days to 40 days, 61-90 days over 90 days as at the date of the CRIB report.
"Your credit report is a record of your credit repayment history compiled from different credit providers. As most lenders will check your credit information to assess your credit worthiness prior to making a decision, a good repayment history will make it easier for you to obtain credit faster and at concessionary rates. To date there are over 3.9 million records in CRIB and borrowers are advised to look at their own records now and then so that they are conversant with their own records"
A top profile client should always have all facilities borrowed by him in the 0 category. That means the facility has been serviced on the due date without a single day’s delay. For this, a client needs to have funds in his current account on the due date in case of a bank or proper standing order instructions/cheque deposit have been effected to have funds in the other lending institution on the due date or cash needs to be deposited on the due date. Even though it is assumed that a few days’ delay will not make a huge difference to the lending institution as they will recover the dues with penal interest, the credit report will not look impressive at a glance. Remember we are looking at a potential HNW client!
For your information, an example is given of an excellent CRIB report and a good CRIB report with five credit facilities, each as at date of a CRIB report, shown in table 1.
Even though in the example both customers X and Y are serving facilities with overdues less than 30 days, customer X is well above the status of customer Y as he has serviced all his five facilities on the due date. Further, there will be concerns for the lending institution whether the two facilities of customer Y in the category 1-30 will ever be paid.
Summary of settled credit facilities (last five years)
This will give a breakup of the number of facilities and amounts of all settled facilities as a borrower and as a guarantor year wise for the last five years from the date of the CRIB report. Obviously for a potential lender, the more facilities in this section would be the merrier.
Details of settled credit facilities (last five years)
This will give the type of the settled credit facilities such as credit card, hire purchase, lease, loan, etc., which will give your potential lender an insight into the type of facilities you are conversant in and easy to service. However, if you are a very young entrepreneur, such facilities will be rare and you need not worry much about that as the potential lender is aware of your age by your NIC number. Also be aware when you age, say over 60, the potential lenders too would be reluctant to give you long-term facilities such as term loans, housing loans, etc., as there is a risk in such lending.
Inquiries made in last six months by lending institutions
This is one of the most checked aspects of a CRIB report by a lending institution. The CRIB report denotes the number of lending institutions which have accessed your credit profile for the last six months. Even though it does not divulge the name of the lending institution, it divulges whether it is a bank or a finance company.
If there are a large number of queries in the recent past by number of lending institutions, it is not a healthy situation. This denotes that you are seeking for credit from all over the place and in financial disarray. When the amount sought is identical or closer, it would appear that other lending institutions also have assessed the same request and have declined the request as there is no necessity for you to have visited so many lending institutions for the same facility amount.
By obtaining an iReport, you will also get to know what lending institutions have checked your profile recently and for what purposes. This would also safeguard you from any unwanted access to your profile from unwanted sources in the lending institutes for no apparent reason.
Credit facility details
This section gives details of your own and guaranteed credit facilities active and settled in full over the last two years. It will carry the following details facility wise:
1.Institution category – bank or a finance company, but the name of same would not be given unless it is over 90 days
2.Facility type – overdraft, loan, hire purchase, credit card, etc.
3.Status – Active or settled
4.Ownership – Own, joint, guarantee, etc.
5.Currency – LKR, USD, EUR, etc.
6.Amount granted
7.Current balance
8.Arrears amount – Do not have such amounts if you need to have a perfect CRIB
9.Instalment amount – This will be an indicator for lending institutions to calculate your debt service coverage
10.Amount written off – No lending institution would want any amount under this for a prospective client as it is a warning signal
11.Reported date – It is the last updated date of that particular facility from the lending institution
12.First disbursement date
13.Latest payment date
14.Restructured date – If any restructuring of the facility has happened, it’s not a cause of concern
15.End date – This is relevant to loans
16.Repayment type –Whether the facility is repayable monthly as in a term loan or credit card or on demand as in a overdraft
17.Purpose
18.Coverage – This refers to whether the facility is secured or unsecured. This will reflect the whether the lending institutions have taken any unsecured risks against you, which is a plus point.
Credit facility for
last 24 months
This is an area credit officers love to check and usually it is the section first seen even though it is the last part of the CRIB report if you do not have any facilities over 90 days. This section gives a monthly facility wise breakup of the last 24 months of your own facilities and facilities guaranteed by you with the number of days overdue for each month.
If the number of days overdue has been zero as indicated in this article it will read as okay, while even if there had been a two-day delay for one month it will reflect as 2. For your information, an excellent CRIB report and a good CRIB report with two credit facilities obtained in January 2013 will look as per table 2.
As you can see in table 2, there is not much of a difference between the two client’s repayment records even though customer Y has delayed payment on four occasions. Yet when a credit officer glances over the above two set of CRIB reports, he will be over the moon with X’s CRIB report and there is no reason why he should have second thoughts in a credit decision if it is in line with the lending institution’s policies.
Dishonour of cheque details
This section is also an integral part of a CRIB report. It will depict details of any cheque returns, including name of the bank, cheque number, amount and reason for dishonour.
The thinking of this aspect from a lender’s point of view will be that if a client is not paying his suppliers who are closer to them than a lending institution, it is likely that they will also do the same thing to a lending institution. Therefore, please ensure to issue cheques only when proper arrangements have been made with your banker.
Facilities over 90 days
This section will indicate the names of financial institutions where client has had non-performing advances during the last 24 months. As a lending institution, they would be highly reluctant to lend to you if you have any facilities under this category. Therefore it is always better for you to liaise with those lending institutions with which you have non-performing advances and discuss ways and means of regularising those facilities.
Lending institutions will always help you to overcome your difficulties provided that they are convinced that you are not a wilful defaulter. Possible remedial action will be rescheduling, extended repayment periods and amicable sale of mortgaged assets, etc.
Conclusion
With this article I have given you a few insights to have an excellent CRIB report even though it will be difficult at times to maintain same. However, if there had been valid reasons for a few over dues, your lending institution will definitely accept same. Yet, leave aside excuses; my aim is to make you a HNW client!
Good luck in your financial journey of success and wish you a happy 2014!
[The writer, Msc Mgmt (USJ), AIB (SL), MCPM, is a banker by profession and can be reached via email [email protected].]References www.crib.lk
