Financial institutions and other credit facilitating enterprises have access to the credit information of over 400,000 of their customers. These banks, credit unions, building societies, micro-financing companies, and even the Student Loan Bureau invariably check your borrowing history every time you consult them for a loan, line of credit, mortgage, or credit card. Now, an unflattering report may disqualify you from receiving the loan or the financing you need. Soon, however, the credit report that is collected on you may affect your access to “hire purchase” contracts; prevent you from securing post-paid telephone, water and electricity services; and even affect your ability to rent commercial or residential properties. Do you know what’s in your credit report? Here are some reasons why you should know how your credit data can influence your access to credit and capital.
What’s a Credit Report?
If you are the recipient of a credit card, a consumer loan or a mortgage at almost any financial institution in Jamaica, a credit report has been generated in your name. A credit report consists of, among other details, your full personal profile, your credit history, and an assessment of your risk as a debtor. Your identification by name, age, address, and TRN comprise your profile. Your credit history is a list of all the secured or non-secured loans, credit cards, and overdraft facilities in your name and to which you are a guarantor or co-signatory. The amount owing to each creditor; the collateral, if applicable; and how well you serviced the loans form part of the history. Your credit worthiness, or your risk as a debtor, is based on your profile and your history of servicing the amount you borrowed.
How Does It Work?
Creditors throughout the island update the information on their customers and share it monthly with one or both of the credit bureaus in Jamaica. The bureaus extrapolate the data of your credit history, personal profile, and level of indebtedness, and turn out a credit report. Included in the credit report is a ranking of your credit worthiness. This ranking is referred to as your credit score. In a nutshell, your credit score is a prediction of how well you are likely to service your loan or loans.
One credit bureau uses a ranking on a scale between 250 and 900, and the other uses an alpha-numeric system from A to E and 79 to 559. The lower the number, the worse the assessment; the higher number, the better the assessment. Credit Bureau uses a ranking on a scale between 250 and 900, another uses an alpha-numeric system from A to E and 79 to 559. The lower the number, the worse the assessment the higher number the better the assessment.
Your credit score can now inform your creditor of the credit risk you pose. Therefore, when you are negotiating a loan from your bank, for example, the bank uses your credit score, among other factors, to grant or deny you the loan. Some banks may even give you a concessionary interest rate if you possess a high credit score.
What Are Credit Bureaus?
Is the collection of all this personal information legal? Yes. Under the Credit Reporting Act 2010, only two companies in Jamaica are licensed to generate credit reports on consumers. These credit bureaus are Creditinfo Jamaica and CRIF NM Credit Assure. Over 70 companies have signed on to share your personal or corporate credit information with these bureaus.
The Bank of Jamaica regulates the daily operations of credit bureaus as stringently as that of financial institutions such as banks or insurance companies. The confidentiality of consumers is carefully protected, with the consequence of severe penalties for breaches. So, for example, under the law, credit bureaus are forbidden from sharing your credit report with any individual or corporation without your written consent.
As a gesture of transparency, by law, every consumer above the age of eighteen years old is entitled to receive a free copy of his or her credit report, with or without the credit score, once every calendar year. In addition, for a current fee of $2000, a consumer may receive a full credit report.
How can you maintain a good credit report? According to Craig Stephen, chief executive officer at Creditinfo Jamaica, three steps are essential. First, you must have at least one or more credit transactions—a loan, credit card, hire purchase, or mortgage, for example—to get a report generated in your name. Second, you must repay your loans promptly when they become due. And third, if you have credit cards, don’t “max” them out; rather, maintain a reasonable balance within the maximum limit.