Public Faces More Stringent Loan Management From Banks

Classified According to Credit and Viability Status-

The National Information and Credit Evaluation Inc. (NICE), a credit ranking company, announced on April 26 that it would provide about 130 financial companies with its “CB Report” that contains information on the credit status of individuals starting April 28.

The report, based on information from some 32,391,708 customers of financial companies, shows assorted customer information with 10 credit rankings based on credit history.

As of the end of the last year, around 1.78 million people with good credit profiles (5.51 percent) fall into the first group, and they made a lone 1.31 times on average with 50 million won in loans. This group took out 96.37 percent of their loans from bank with delinquency rate of a mere 0.04 percent since last July for six months.

At the bottom of the spectrum, however, are 2.15 million people (6.65 percent) who make up the tenth group with the poorest credit history, with 24 million won in loans and 2.43 times in frequency on average. The lower a person’s credit ranking is, the more frequently they take out smaller loans.

People with the lowest credit ranking took out loans from credit card companies (25.1 percent), banks (24.74 percent), capitals (17.69 percent), and mutual savings banks (15.19 percent). They had 6.97 credit cards on average, ranking third, following the first and second group of people with good credit profiles.

People in the tenth ranking group showed a 71.84 percent of delinquency rate (more than five days in arrears).

In terms of changes in credit grades between last September and the end of December, 14.67 percent to 21.08 percent of people between fifth and ninth grades rose to higher credit grades. Meanwhile, only 9.25 percent of people with the poorest credit rating were adjusted to higher rankings. In other words, the poorer credit rating people have, the less likely they are to rise to higher grades.

The report includes information on how many people with debts less than 30 days in arrears became those with debts between 60 and 90 days in arrears, and how many credit cards were issued to each group of people in each quarter of the year.

Strengthened Customer-Rating Management-

Chances are that financial companies are dealing with their customers in a more stringent manner, taking advantage not only of individual customers’ credit rankings but also of information on assorted people in credit grades.

The companies with a large portion of customers with poor credit history may well strengthen their customer-rating management since there is little room for customers to improve their ratings and there is much room for delinquency rates to increase.

Therefore, customers should pay close attention to managing their own credit status in accordance with growing credit appraisal measures that companies obtain.

After the regulations on credit delinquents are loosened, other credit rating firms are poised to provide more far-reaching information on customers’ credit history.

The KCB, which plans to start operation in the second half of this year, will offer more stringent data on delinquents of less than 300,000 won to financial companies.

“Despite the abolition of the management system on delinquents, since each credit rating firm is expected to give information on customers in more various forms to financial firms, credit management will become stricter accordingly,” said Kang Yong-gu, the CB operation manager of NICE.

Ki-Jeong Ko koh@donga.com