Don’t be shocked. Financial institutions are just informing us that they are required by law (RA 9510) to share our information to Credit Information Corporation (CIC). What does CIC do anyway?
In simpler terms, CIC was formed by said law years ago to consolidate credit information from various sources: primarily from banks, cooperatives, lending companies, but eventually from utilities (electricity and water), telco networks (landlines, mobile phones, internet) etc. Basically from entities who give us credit in the form of cards and loans, or postpaid plans or consumed water, internet and electricity. Check their website for more details.
What will they do with the data?
In a nutshell, contributing entities will have the right to see the data of other contributors and then come up with their own lending policies based on the information they see. Data sharing across industries. As such, banks may now know who has a good repayment history with their post-paid plans and who are delinquent. Similarly, telcos may now check with banks who are updated in paying their credit cards, and who are not before granting that plan 2999 with iPhone6! Of course these are all bound by confidentiality, data security, misuse for unsolicited products and calls, and informing you that your information will be submitted (hence the SMS).
For many years now, at least for banks (I know because I belong to the industry), they already share negative data (bad customers) with one another, so they would know each other’s bad customers. So don’t expect to fool one bank in getting a new loan, if you ran away from a previous delinquent loan with another bank. But without the law, we don’t want sharing who our best customers are to the competition.
But now with CIC, the so-called “positive data sharing” is made possible, a more comprehensive view of the lending market is now available — all the customers whether good or bad, and their repayment history. So now, banks don’t only have visibility of the bad customers shared by its peers, but also the good customers not just of banks but of telcos, utilities and other CIC members.
The grand objective is to make lending easier for good customers, and avoid lending to historically bad customers, thereby making our banking, telco and service-provider industries more stable and sustainable. Also, for better financial inclusion such that providers can confidently lend or grant lines and services to more deserving customers.
Should us individuals be concerned?
Well, whether there is positive data sharing or not, Juan must always maintain a good credit standing whether with banks, with telcos, and even your water and electricity bills. More so in the future, since all these companies will share your records with one another and determine whether they still want you as their customer or not. They will now know who’s paying the bank dues, utility bills and phone bills, among others.
Possibly in the next few years, each of us will also have a credit score / credit rating, which we as customers can readily access. It’s just like a grade in school, but this time pertaining to how we handle our credit and loans and other payables. This is already common practice in more advanced countries like the US, wherein applying for a loan only takes a very short time since they already know the applicant’s credit score.
Here applying for a credit card or loan still takes a while because of all the documentation, verifications and other credit investigations being done. But with positive data sharing and credit scores available, hopefully the processes will be much faster, lending goes faster to deserving “good” customers.
Again, take care of your credit standing in all service providers. You don’t want to be like Selina Kyle in the Dark Knight Rises, needing a “clean slate” computer program to erase all her bad records, just so she can have a fresh start. We still love her though.