CAIRO: Want to avoid falling into the grips of mortgage foreclosures, default loans and credit denial? You’d better improve your credit score.
Pay your bills on time and pay off any small collections that may have accrued on your credit files because the higher your credit score, the more lending tools you are eligible for in the growing market.
That is the next move for Egypt’s newly established credit bureau. “We plan to launch the scoring system within the first quarter of 2009, said Mohamed Refaat, managing director of i-Score, Egypt’s first private credit bureau.
The official line for the scoring system is that if you want to purchase a home or vehicle, your credit score will be the first thing lenders look at.
Credit scores will ultimately determine the price consumers pay for almost everything bought in installments: mortgages, car loans and insurance, and even the latest plasma screen TV.
“i-Score tracks your payment habits. Good payment habits get you a good score, explained Ghada Massoud, information officer at i-score.
The bureau is currently in negotiations with an international player to assist in setting up an efficient scoring system.
i-Score officially began operations last July, catering credit reports to banks as well as mortgage finance and leasing companies. As the name suggests, i-Score evaluates a person’s credit worthiness and maps out potential risk posed by lending money to consumers, which will help mitigate losses due to bad debt.
All 40 banks operating in Egypt, seven mortgage finance companies and five leasing financiers have helped Egypt’s credit bureau collate clients’ personal financial data.
In the process of building its information database, i-Score has faced some resistance from banks that refused to divulge their clients’ credit history. To tempt banks and lenders to provide information, i-Score operates on a give and take basis.
“They have to provide data to receive data, Massoud said.
Since some lenders proved more difficult, i-Score delayed its official launch, and had bureau officials outlining the importance of credit bureau information that will in turn enable lenders to assess and manage risk.
i-Score will provide lenders with a five-year credit history for loan applicants with an internationally accredited IT system and top-of-the-line security provisions. Lenders can use the bureau’s credit scores to determine who qualifies for a loan, at what interest rate and at what credit limits. i-Score collects and records both negative and positive information of a person’s payment habits, credit history and bankruptcy, if applicable.
Consumers with bad credit history are subject to paying higher interest rates or could have their loans revoked in a bid to reduce rate of defaults and to encourage borrowers or debtors to pay installments on time.
“i-Score cuts time taken to qualify for a loan, improves lender’s productivity and reduces default rates, Refaat said. “Individuals applying for loans can present their i-Score credit worthiness report which will save them from paying collateral.
The bureau collects credit information and financial data – provided by lenders – on both the retail segment (consumers with no maximum ceiling) and small and medium enterprise (SMEs) with a ceiling up to LE 1 million.
Information on bigger corporates is only collected by the Central Bank. At the end of July, i-Score recorded information on some 3.1 million individuals and over 35,000 SMEs.
Fees for accessing consumers’ credit reports are LE 12 per individual inquiry, while fees for SMEs credit report are LE 25 per company, said Massoud, explaining that i-Score’s electronic database is accessible via a secured network. “All they [lenders] have to do is enter the individual’s national ID number and/or name, and they will access the system right away.
The system is only accessible to lenders to protect consumer’s privacy. However, individuals have the right to check their own credit score so they can improve it if necessary.
Dispute resolution is also possible with i-Score in case of incorrect information. “Individuals have the right to dispute. .They can present documents [proving] that they have paid their credit, and we enter the new data into our system, Massoud explained. “Disputes are [usually] resolved within 10 days.
As i-Score is currently gearing up to launch its new scoring system, the bureau is also making an attempt to lure mobile phone operators, insurance companies and providers of goods and services on credit into the system.
“It’s all related to payment habits. If I don’t pay my phone bill on time, then it’s an indication I won’t pay my credit on time, Massoud clarified.
i-Score officials explained that telecommunication companies can benefit from employing i-Score techniques, as credit reports will enable operators to efficiently assess a person’s credit worthiness and ability to pay back the bill before approving a new phone line.
“Most importantly, mobile phone clients will eventually realize that not paying bills on deadlines will result in denial of credit facilities needed when buying a car or a house, for example, Refaat said.
Bureau officials met last September with Egypt’s three mobile operators, in the presence of Amr Badawi, managing director of National Telecom Regulatory Authority, and Mohamed Abdel Aziz, senior advisor to the governor of the Central Bank of Egypt. Negotiations are still ongoing, and the bodies are expected to sign a memorandum of agreement by the third quarter of this year.
“Mortgage lending in Egypt is growing, however, it only represents [roughly] one percent of GDP. What prohibits companies from expanding in lending operations is lack of information. This is where we come, and i-Score can help in building an efficient information process, he added.
With Egypt’s credit bureau now up and running, the message is clear: “For borrowers: If you wish to buy anything that takes credit, you will need a good credit score. For lenders: Be wise and use i-Score’s credit reports before lending money, Refaat said.id.
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