One of the most aggravating things a person can experience is when their credit card or loan application gets declined. Especially in the Philippines where transparency is not the norm and we don’t have a systematic credit history reporting, many people are left guessing in the cold, wondering why the bank doesn’t want their business.
Did the bank think you can’t pay their dues? Why, you have a high income and can comfortably pay off your balance each month.
Maybe the bank uncovered your unpaid credit card bills? But that was from years and years ago when you were still a young, irresponsible person. You have totally changed your ways and have turned into a financially responsible grown up.
It’s because of fraud isn’t it? Somebody fraudulently took out a loan under your name and didn’t pay it off, and now you’re suffering the consequences of somebody’s crime. It can literally be anybody’s guess. Who knows. Maybe? It’s certainly possible.
The good thing is, the Philippine government is finally implementing the Credit Information System Act, which is supposed to address the need for reliable credit information concerning the credit standing and track record of borrowers.
Take note though that the law was passed way back in 2008 but the implementation was only started a few years ago. So don’t expect that your credit information will be fully updated. But there’s progress at least. Yes?
What is the Credit Information Act?
This law was passed because the government recognized the need to establish a centralized credit information system for all credit borrowers in the country. It aims to collect and distribute accurate credit and credit-related information of all entities participating in the Philippine financial system.
The law requires banks, quasi-banks, their subsidiaries and affiliates, credit card companies, life insurance companies, and other entities providing credit facilities to submit credit information and updates on a regular basis to the Credit Information Corporation (CIC).
The CIC is the company that will:
Receive and consolidate basic credit data,
Act as a central registry or central repository of credit information, and
Provide access to reliable, standardized information on credit history and financial condition of borrowers
As of March 2020, the CIC database contained 11.3 million unique individuals and 83,000 companies/proprietors, with 73.5 million contract data as of March 2020. And the information will continue to grow.
What has been going on in the past is that banks and other institutions keep their own record, establish their own information-sharing system keeping track of the credit activities and behaviors of their respective clients, hire a third-party company that has their own database of consumer credit information, or a combination of the three methods, to assess the creditworthiness of a credit card of loan applicant.
I’m sure you’ve noticed that even when one bank refuses your credit card application, another bank will send you pre-approved credit cards. It’s because different banks may be using different credit information sources.
One of the goals of this law is to make sure that all financial institutions can have access to the entire credit history of borrowers, regardless of where the credit was availed of.
Submitting entities and date ranges they are required to report
The law requires that Submitting Entities report the credit information of their clients to the CIC. The Submitting Entities include:
Nongovernmental, microfinancing organizations
Credit card companies
Insurance companies and
Government lending institutions
Other than these credit institutions, telecommunications companies are now required to submit client and payment pattern information to the CIC. We can reasonably assume that other utility providers may be required to submit their information as well in the future.
Also note that the CIC may also access credit and other relevant information from government offices, judicial and administrative tribunals, prosecutorial agencies and other related offices, as well as pension plans administered by the government.
The CIC the Submitting Entities to submit the basic credit data of clients starting from way back 2011 and onwards. The matrix below shows the Submitting Entity and the reporting date ranges of the basic credit data they are required to submit.
These information are from the various circulars and memoranda issued by the CIC to the institutions.
At this time, it looks like information prior to the said dates will not be included in the credit history kept by the CIC.
What information is included as basic credit data?
To give you an idea of how comprehensive the information that will be reported to the CIC, I’m including all the data points required to be submitted. Note that the CIC collects the basic credit data of borrowers at least on a quarterly basis.
1. Personal circumstances including name (last, first, middle), DOB, sex, civil status, present residence, employer and position or business, as the case may be
2. Number of children depending for support
3. TIN, SSS, GSIS
4. Net income
5. Residence for the last 2 years
6. Employer/s or business/es for the last 5 years
7. Owners/lessee of house occupied
8. Car/s owned
9. Banks where accounts are maintained, including types of bank account; and
10. Other assets, real or personal
Exposure Profile (for each creditor)
1. Type of obligation or account (credit card, personal loan, commercial loan, mortgage, secured)
2. Type of transaction (maturity, revolving, open, LC, installments)
3. Account no
4. Client ID no
5. Date account was opened
6. Originating unit/branch/department for each transaction
7. Payment method (frequency of periodic payment)
C. Initial Loan Amount
D. Outstanding Balance
E. Mode of Payment
F. Remaining period of obligation on the specific exposure
H. Maturity of obligation was settled
I. Date of last account activity
J. Date when account entered in arrears
K. Amount past due: 1-29 days
Over 180 days
1. Past Due
2. Defaults on loans
3. Details of the settlement of loans that defaulted
5. Adverse court judgments relating to debts
6. Reports on bankruptcy or insolvency
7. Petition or order on suspension of payments
8. Corporate rehabilitation
9. Other pending court cases (either as plaintiff or defendant) related to credit transactions or cases that will affect the financial capacity of the borrower
10. Inclusion in a bouncing check checklist
11. Cancelled credit cards and
12. Such other information that may be determined by the CIC
You can get check out how a credit report looks like by going to the CIC website here.
(FYI, I downloaded a copy of the sample report so that I can post it here but the quality is so bad that you can barely see anything. So I decided it would be best if you view the sample in the CIC website itself.)
A note on negative information
Negative information (unpaid and past-due credit and loans and the associated information), should stay in the database of the CIC unless sooner corrected, for not more than 3 years from and after the date when the negative credit information was rectified through:
Payment or liquidation of the debt,
Through settlement of debt through compromise agreement or court decisions that exculpate the borrower from the liability.
Notice that the negative information will only be removed only if the debt is paid or settled. If the debt is not paid, the negative information will stay on your record.
I would just like to point out that in the US, negative information is required to be removed after a prescribed number of years. For instance:
A credit reporting company generally can report most negative information for seven years.
Information about a lawsuit or a judgment against you can be reported for seven years or until the statute of limitations runs out, whichever is longer.
Bankruptcies can be kept on your report for up to 10 years, and
Unpaid tax liens for 15 years.
However, if you do pay your past-due debt, the negative information should be corrected and updated within 15 days from the time of payment, liquidation or settlement of debts. But again, it can stay there for up to 3 years from the time of payment or settlement.
Now that you’ve seen how comprehensive (even intrusive) the information that will be gathered, you might think of opting out of the reporting.
Who can access your credit information?
Because these are very information that should be kept confidential, only the following parties can access your basic credit information:
Submitting entity – entities that provide credit facilities such as banks, quasi-banks, trust entities, investment houses, financing companies, cooperatives, nongovernmental, microfinancing organizations, credit card companies, insurance companies, and government lending institutions.
Here’s a complete list of all Submitting Entities that provide credit details to the CIC.
Borrower/Data Subjects – natural or juridical person, including LGU, subsidiaries and affiliates, that applies for and/or avails of a Credit Facility
Accessing Entity – Any submitting entity or any other entity authorized by the CIC to access basic credit data from the CIC
Special Accessing entity – accredited private corporation engaged primarily in the business of providing credit reports, ratings, and other similar credit information products and services.
So far, these are the registered Special Accessing entities or Credit Bureaus and their details
CIBI Information Inc – issues credit scores. Located at 30th floor BDO Equitable Tower, 8751 Paseo de Roxas, Makati 1226 / 632-8819-2424 https://www.cibi.com.ph/contact/
Compuscan Philippines** Their reports are not yet available
CRIF Philippines – CRIF Corporation / Located at 24th floor Philippine AXALife Center / 1286 Sen. Gil Puyat Avenue Cor. Tindalo Street, Makati City 1200, firstname.lastname@example.org / 632-8801-7024
TransUnion Philippines – issues credit scores / has fraud flags. Located at TransUnion Information Solutions, Inc. 27th Floor, Unit AB Tower 1, Ayala Triangle, Ayala Avenue, Makati City, 1226 / 632-858-0400
Outsourcing entities accredited by the CIC
Outside of these institutions/people, nobody else SHOULD be able to access your account.
How do I get a copy of my credit report?
A Credit Report is a summary of consolidated and evaluated information on creditworthiness, credit standing, credit capacity, character and general reputation of a borrower.
According to the law, borrowers can get a copy of your credit report through:
- The financial institutions where they plan to transact or has an existing contract;
- Accredited credit bureaus or what we refer to as Special Accessing Entities (CIBI Philippines, Compuscan Philippines, CRIF Philippines, TransUnion Philippines, details above); and
- Credit Information Corporation (CIC), located at 6th Floor, Exchange Corner Building 107 V.A. Rufino Street corner Esteban Street Legaspi Village,1229, Makati City, Philippines
If you wish to get a copy of your credit report from the CIC, you may contact them through the following channels:
Landline: (02) 8236-5900 (available Tuesday and Thursday, 9am to 3pm due to COVID-19)
A note on credit scores
Most people may be familiar with the credit score system used in the US. Credit score is a number based on a person’s credit history and represents the creditworthiness of an individual.
The CIC does not issue a credit score. However, the accredited bureaus do. So don’t be surprised if you request for a copy of your credit history from the CIC, expecting to get a score, but not getting one. The CIC will give you the basic credit information only.
However, credit bureaus assign credit scores using an established and defined ranking – usually proprietary – system based on the basic credit history from the CIC and other information that they buy or gather from other providers.
The CIC information is positioned to be the main source of data for the credit bureaus. In addition, the credit bureaus can also use their own proprietary ranking system, as well as other data sources, to come up with the credit scores they will assign to individual borrowers. Credit scores are value-added service from the credit bureaus.
How can credit reports (potentially) help us?
The Credit Information System Act has many commendable goals, the most relevant to the regular consumer is that you are now entitled to know the causes of refusal of application for credit facilities or services from a financial institution that uses basic credit data as basis or grounds for such refusal.
For example, your application for an account was denied by a credit company that uses the basic credit data from the CIC (basically all of them are), then you are entitled to know the reason why your application was rejected. The credit card company should tell you. Otherwise, they are liable to penalties from the CIC.
This law is also meant to address and alleviate problems faced by micro, small, and medium sized enterprises (MSMEs) in terms of accessing credit facilities.
I’m very excited for the possibility of this law helping women entrepreneurs and our unbanked countrymen who historically do not have access to favorable credit rates from major banks, either because they are seen as unreliable or because their businesses are usually too small for the banks to bother with.
I hope that through this law, women and the unbanked will be able to access cost-effective loans at favorable rates without reliance on collateral, which many of these people don’t have in the first place.
I hope that with credit reporting will actually result in what it purports to do, that is, to help people who have difficulty accessing credit, such as the unbanked and women. I hope it doesn’t degenerate into another weapon against the poor and cause us more hardships by adding more barriers to accessing credit facilities and even basic services.
I also have some additional concerns about this law, which I compiled here.
How will the CIC and the government ensure the security of the sensitive information gathered? We know of major data breaches in the US in the past, which is worrying because if the US can experience such data breach with their advanced internet security infrastructure, how are we going to fare against similar attacks?
I’d be horrified to find out if in the future, the credit data of the entire Filipino people will be available for sale in the dark web.
How will the CIC and the accredited bureaus safeguard our data? And in the event of a data breach exposing our information, will we be compensated?
I’m really pressed about data security because I had first hand experience about how information from credit reports can be used by criminals for fraud and identity theft. Once somebody has access to sensitive information, it’s very easy to commit crime and assume somebody’s identity.
You can steal somebody’s identity once you know their credit history, all the homes they lived in, the credit cards they had, the cars they drove, and their employment history. Information that can be culled from credit reports.
So I hope that the CIC and the government will take the security of our credit information seriously because failing to do so can ruin people’s lives.
I wonder about the use of credit reports in accessing other kinds of services in the future. For example, will landlords adopt the practice of other lenders by checking the credit history of potential renters? How about when we buy expensive things by installment (laptop, mobile phones, and similar items)?
What is the possibility of a good credit history leading to lower interests and more favorable borrowing terms for consumers? It seems that the focus right now is on the approval/denial of credit applications. There is no mention of the borrowers being able to benefit from a good credit history with lower interest rates.
At this time, I don’t know the answer to these questions.
Another question that you’re probably thinking about is: do you really, absolutely need to have a very good/pristine credit history?
Not necessarily. People have been always able to purchase and fund their businesses, investments such as real estate acquisitions, and other expenses with cash. And if you’re going to continue to pay with cash in the future, then a less than ideal credit history or credit score will not adversely affect you.
Of course, your goal is to eliminate debt altogether, as I mentioned in this post about how to adapt the teachings of Dave Ramsey to the Philippine setting. But having a credit history is increasingly becoming inevitable. Almost everyone has a credit card, a phone line, or at least a loan from a local lending facility.
So if you’re planning on accessing a business loan, credit card, or mortgage in the future, I suggest you be circumspect with your debts, make sure you choose the debt terms most favorable to you, and of course, pay your debts so that your credit history will be an asset to you in the future.