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Amicus Curiae

Watching over your credit reputation

Genie Celini D. Nuevo

October 19, 2017

Reputation matters.

It could make or break one’s chances of availing a much needed financial life line.

In the financial industry, before a credit facility is extended, it is a matter of course, that the financial position of individuals or entities, seeking to avail of such facility, are assessed. Essential to this is the gathering of a would-be borrower’s credit information, which task is now made easier with the passage of the Credit Information System Act or Republic Act No. 9510 in 2008 which created the Credit Information Corp. (CIC). The law was passed with the view that an efficient credit information system, which includes making available reliable credit information at the least cost, will contribute to a healthier and more stable financial system.

Now, banks, quasi-banks, their subsidiaries and affiliates, life insurance companies, credit card companies and other entities that provide credit facilities, collectively referred to as “submitting entities”, are required, as a matter of law, to submit basic credit data and updates to the CIC.

Basic credit data refers to positive and negative information provided by a borrower to a submitting entity in connection with the application for, and availment of, a credit facility and any information on the borrower’s creditworthiness.

To be more specific, under the implementing rules and regulations of the Credit Information System Act, for an individual, this would include information on one’s personal circumstances such as full name, date of birth, sex, civil status, present residence, employer and position or business, number of children depending for support, Tax Identification Number, Social Security System Number, net income, residence for the last 2 years, employer/s or businesses for the last 5 years, owners/lessee of house occupied, cars owned, banks where accounts are maintained and other real or personal assets. For a corporation, it includes its date of incorporation, primary purpose of business, term of existence, net taxable income, bank/s where accounts are maintained, other assets, both real and personal.

From the basic credit data, a credit report is generated; this is the summary of consolidated and evaluated information on creditworthiness, credit standing, credit capacity, character and general reputation of a borrower. These credit information are handled with strict confidentiality and may be accessed by submitting entities, data subjects and other entities duly accredited by the CIC, and may only be used for the declared purpose of establishing the creditworthiness of the borrower.

Of a more important note, a credit report includes negative credit information which concerns the poor credit performance of borrowers such as but not limited to defaults on loans, canceled credit cards, adverse court judgments relating to debts and reports on bankruptcy, insolvency, petitions or orders on suspension of payments and corporate rehabilitation. This shall stay in the CIC’s database for not more than (3) three years from and after the negative information shall have been rectified.

Because this can affect greatly a borrower’s likelihood to have credit access, the borrower, as a matter of right, is given ready and immediate access to one’s pertinent credit information for a prescribed fee.

In case of erroneous, incomplete or misleading credit information, the subject borrower shall have the right to dispute the erroneous, incomplete, outdated or misleading credit information before the CIC. If such is denied without justification, the borrower may be entitled to indemnity.

Likewise, the borrower has the right to know the causes of refusal of the application for credit facilities or services from a financial institution that uses basic credit data as basis or ground for such a refusal.

Given the way with which one’s credit information is generated and used, there is thus a need for participants in the industry to ensure that only accurate data is given and processed, as erroneous or conflicting data may have a negative impact on the credit assessment that may be made. It also creates an imperative for people to be more careful and cautious with their financial dealings as these may affect their credit reputation.

With credit information being procured and made available at a less expensive and less time-consuming manner, lenders have better access to a fair, reliable, and objective tool to assess the payment behavior of borrowers and to improve on their current credit offerings. Borrowers on the other hand, are afforded with wider access to credit. The challenge now for the borrowers is to be more proactive in building a creditworthy reputation — because in the financial industry, reputation matters.