When entrepreneurs apply for a loan at Fine Bank, they sometimes ask, “in what bases” does Fine Bank verify the credibility of its borrowers? Some people probably have already come across the name The Credit Information Bureau. If you hear it for the first time, I invite you to the article!
The Credit Information Bureau, is a private institution (to be precise: a joint-stock company), whose owners are primarily banks. Banks established The Credit Information Bureau to exchange information, which on the one hand is a banking secret and on the other is very valuable in the credit assessment of each borrower.
Who goes to The Credit Information Bureau?
Each of us may use a loan or credit from time to time. At least for the purchase of some consumer good (TV, console or exotic vacation). Information on any such credit transaction, if carried out by the bank, is forwarded to the Credit Information Bureau.
After the loan is granted, the banks also report any change in debt service. Whether we repaid the loan installment or not. Whether we used the available credit card limit or not. Have we applied for a loan that is awaiting consideration?
If we incur liabilities as consumers , we get to a part of the collection that collects information about “consumer” debts.
When we run a business, the use of additional financing can be beneficial to our business. So we take a loan “for the company”. Is the same way to The Credit Information Bureau information about these obligations incurred “on the company”?
YES, it’s exactly the same.
If we take out a loan for our business, then our data will go to part of the set with “company” liabilities. So they differ with whom the contract is concluded. If we run a business in the form of a sole proprietorship, then we will be a party to the contract as a natural person running a business.
When we conduct business in the form of a company – the party to the contract will be the company and the company data will be forwarded to The Credit Information Bureau.
And why is such data collected at all?
It turns out that such data (who, when, when and for how long incurs their liabilities and how pays them back in a timely manner) allows to “predict” what the borrower will handle in the future. Will it make payments on time or with delays . They also give you the opportunity to quickly assess and make a credit decision in a few minutes (just like on Fine Bank).
Thus, all companies that are required by law to make a risk assessment before concluding a loan agreement are interested in using this data. Also other financial market participants who borrow money want to have access to this data.