Getting A Clean Credit Report

Source: Bernama

Ever wondered how banks evaluate whether a person is credit-worthy or not without the person revealing any credit information about him or her?
Or have you ever wondered how much information the bank has on a person's credit pattern?

The answer lies with the Credit Bureau and its database known as the Central Credit Reference Information System (CCRIS), which serves as a reference point for the banks. The Association of Chartered Certified Accountants (ACCA) explains at great length the workings of the Credit Bureau and CCRIS. Managed by Bank Negara Malaysia, the Credit Bureau was formed under the Central Bank of Malaysia Act 1958 and has been in operation since 1982.

Since then it has accumulated credit information of over five million borrowers in Malaysia. The information is obtained from more than 50 financial institutions, including commercial banks, Islamic banks, finance companies, merchant banks and other financial institutions and stored in the CCRIS. Apart from being the reference point for financial institutions to make faster and informed decisions on each potential borrower, the Credit Bureau is actually part of BNM's strategy to promote best practices in credit risk management among financial institutions.


UNDERSTANDING CCRIS

Whenever a person borrows money from a financial institution or holds a credit card, the information will be relayed to the CCRIS. The details, among others, include personal particulars such as name, identity card number and address, and details of credit account such as the type of credit facility, credit limit, outstanding balance, conduct of account and status of legal action, if any.To verify against the personal particulars, a cross reference is made with the National Registration Department and the Companies Commission of Malaysia.The information stored in CCRIS will then be made available to financial institutions upon request.Since many borrow money from financial institutions in one way or another, this may make a person wonder whether the personal details are secure and will only be used for the purpose of evaluating the person's credit application or reviewing credit status.


THE SECURITY ISSUES

The credit information provided by the Credit Bureau to any financial institution is classified as secret.The financial institutions are required to observe the provision of banking secrecy under the Banking and Financial Institutions Act, 1989 (BAFIA) and the Islamic Banking Act, 1983 (IBA). The information is strictly for credit evaluation purposes only and the financial institutions are not allowed to divulge them to any other parties except in the course of court proceedings between the person and the financial institution or when it is authorized under any Federal law to be revealed to the police. Thus, it can be rest assured that the information will not be used for unsolicited marketing or product promotion. In addition to laws, the CCRIS records all requests for the credit report in detail.For instance, the CCRIS records the details of the bank requesting for the information, the officer making the request and the time of access. By doing this, the Credit Bureau and the internal auditors of the respective financial institutions can track down who has sought information on any particular borrower.


ACCESSING THE CREDIT INFORMATION

The information in CCRIS is not the privilege of financial institutions only. The borrowers too have the right to obtain the information as well. And this has been made possible since 2002 following a change in the law initiated by BNM. To obtain a credit report, one has to fill up a Credit Report Request form available at the Credit Bureau office or can be downloaded from its website at http://creditbureau.bnm.gov.my. The completed form need to be submitted together with a copy of identity card and two other supporting documents such as driving licence or utility bills for verification. It normally takes a month for the Credit Bureau to process any such request. Upon obtaining the credit report, any discrepancies in the information can be rectified by filling up a Request for Data Review form. Each discrepancy has to be listed clearly and the request for change must be supported with facts. The Credit Bureau will then investigate and notify the financial institution concerned.

If the financial institution finds that the disputed information has been inaccurately relayed to the Credit Bureau, it must make amendment and send it back to the Credit Bureau. The Credit Bureau only provides factual information on a person's credit history without passing judgment on the person's credit worthiness. It's totally up to the respective financial institution to decide whether to approve the loan application or not. Thus, if one bank rejects the loan application, it does not mean that the other banks will follow suit because each bank has its own credit evaluation system.

The banks, nonetheless, will make decisions based on the credit report that sometimes can adversely affect a person's application especially if it's tainted with poor payment records like late payment or worst, non-payment of loans. If a person's credit report falls in this undesired category, the person should contact the financial institution and discuss the possibility of rescheduling the payments. Once the account is regularized, it will reflect an improved position and improve the chances of securing the much-needed loan. Meanwhile, there is another source of credit information available in the market commonly used by financial institutions. It is widely known as CTOS.

Unlike CCRIS, CTOS collects data from publications or advertisements or based upon searches normally deemed reliable. Thus, the data accumulated by CTOS may not be up to date or exhaustive like the one collected by CCRIS but the financial institutions still refer to them in evaluating credit worthiness of any potential borrower.