DBCB Credit Bureaus

Depending on the regulatory environment, the availability of and willingness to share credit information by data owners and the technological maturity of the market, the following types of Credit Bureaus may be established:

• Basic Credit Bureau - Negative credit information only
• Full Credit Bureau - Negative and Positive credit information
• World Class Credit Bureau - Negative and Positive credit information, Public or third party information (electoral rolls, registries, courts, immigration etc), Value added products such as Fraud Detection, Account Monitoring of Individual and Commercial Entities' Credit Reports, Credit Scoring and Risk management consultancy

A Credit Bureau is characterized by the following:

• It does not make the decision whether to grant or decline an application for credit. It focuses primarily on supplying factual credit related data to lenders, to be incorporated into their credit assessment process in combination with the lenders internal credit policies and rules
• A Credit Bureau is not a provider of a ‘Blacklist’ or a ‘Negative List’ of borrowers. Although some Credit Bureaus may start from the point of collecting default (negative) data only, the intention is to move to collecting a comprehensive view (positive and negative data) of an Individual’s or Commercial Entity’s credit history
• Data Providers (also called Members) contribute credit information pertaining to their borrowers on a regular basis, usually monthly. The data received by the Credit Bureau is validated prior to it being loaded into its system. Over time the credit history of the borrowers is built, providing a rich source of factual credit utilization and repayment performance data which is very indicative of credit behavior
• A Credit Bureau may also collect data from Public or Third Party sources such as address data, national identity data, voters or electoral rolls data. This data is typically used for verification or fraud prevention. Courts’ judgment (suits) data may be used in the credit granting process since it is indicative of the financial standing of the borrower
• In principle, the Credit Bureau manages the data and does not alter data records received from Members or third parties, unless this is done with their express permission. This activity is strictly controlled and closely audited
• Use of a Credit Bureau services allows Members to review lenders credit utilization, their level of indebtedness as well as their commitment to repaying their credit obligations including missed or erratic payments, as well as identifying willful defaulters or possible fraud
• A Credit Bureau enables the confidentiality of Members’ data as well as the data privacy of borrowers

The following are some of the benefits of having a Credit Bureau:

• To Lenders
• Helps to sort bad borrowers from good ones
• Saves time spent on borrower evaluation
• Reduces the cost of screening borrowers
• Prices loans adequately in accordance with the risk of the borrower
• Reduces overall system risk
• To Borrowers
• Helps to build reputation collateral i.e. a history of responsible credit lending
• Provides access to credit to deserving borrowers
• Rewards good borrowers by easing access to credit, lower interest rates and so on
• Enables borrowers to monitor and improve their credit records
• To Regulators
• Helps to monitor efficient allocation of credit
• Provides comprehensive and constantly updated data on borrowers and lenders – effective credit risk monitoring for the economy
• Facilitates credit expansion without compromising on the quality of credit
• Reduces Non Performing Loans and the probability of defaulting on loans, in the economy

Fundamental operating principles underpin the successful functioning of any Credit Bureau. These operating principles are:

• The Principle of Reciprocity
• Data may be accessed based on the data being supplied by the lender. A lender supplying only negative data may access only negative data, a lender supplying positive and negative data may access positive and negative dat
• The Principle of Neutrality
• Equal treatment for all Individual and Commercial entities
• Provide only factual credit related and demographic data (name, ID or passport number, date of birth, gender, address and contact details) or firmographic data (name, license or registration number, address and contact details)
• No opinions are formed or made regarding the creditworthiness of borrowers
• Efficient Dispute Handling
• A borrower has the right to access and review his/her own Credit Information Report at a reasonable fee
• A record of who has received the Credit Information Report must be kept
• The borrower has the right to challenge any data in the Credit Information Report and to the correction of any errors
• Right of redress to any lender who has received an erroneous Credit Information Report
• Security Standards
• Confidentiality and privacy of information must be enabled
• Provide a secured environment, both physical (CCTV, access control to offices and computer rooms) and logical (firewalls, intrusion detection, password access)
• Only authorized lenders or Credit Bureau personnel may access the credit information
• Credit Information Reports may only be used for authorized purposes

In order for a Credit Bureau to be successful the following key factors must exist:

• Advanced technologies underpinning the operation of the Credit Bureau
• Rich sources of data
• Full and regular sharing of data
• Data accuracy and completeness
• Diverse value added products
• A sound legal framework