Index Will Standardize Credit Scores

The “Credit Index” has come out, with which individual credit rates in the Korean society can be reviewed comprehensively.

Dong-A Ilbo and the National Information and Credit Evaluation (NICE), a credit rating company, announced that they will periodically publish the “Dong-A-NICE Credit Index” which puts together Koreans’ credit scores.

This is the first time globally for an index evaluating credit ratings of a country’s members to be established. International credit rating companies grade credit ratings not of members of the society but of nations.

“Dong-A-NICE Credit Index” pieces together credit scores of 33,679,786 registered at the NICE, averages them, and calculates a relative point at a targeted time. The standard point is set at 1,000.0.

The Dong-A-NICE Credit Index in March 2006 was 1008.7, which is 8.7 up from the standard point of time. Compared to February (1007.6) and March in 2005 (1003.3), it’s up by 1.1 and 5.4 respectively.

In a broader context, individual credit ratings in the Korean society have been gradually improving since the second half of 2004. That is because the importance of credit, “an invisible money” is growing, as the Korean society becomes a credit-based society.

Everyone who made a credit card or received a loan in the country has his or her own credit scores. Individual’s credit scores go up and down according to financial transaction performance such as repaying loans, being in arrears, and a credit inquiry.

If individual credit ratings become troubled just as in 2003 when the number of credit delinquents surged, social insecurity grows and the economy might become derailed.

Even though credit issues like that are very important, there has been no index that gives the people’s overall credit situation at a glance.

Kang Yong-gu, the head of a NICE office, said that the development of the Dong-A-NICE Credit Index makes it possible to understand the present condition of the people’s credit and its developments, and that the administration could also utilize it.

For instance, when the credit index goes up, financial companies can use it in various ways such as raising the credit ceiling, the total amount of money which can be loaned to customers.

Suk-Min Hong Sang-Hoon Kim smhong@donga.com sanhkim@donga.com