Credit where credit is due

Credit.  The word can mean a number of things.  It can mean that you are acknowledging what somebody else did.  It can be associated with the lending or borrowing of money.  Lots of things.  In today’s article, I’m going to talk about credit in terms of borrowing money, and also the tracking of your borrowing and pay back habits.

In the USA, and probably most of the western world, when you borrow money, make payments for money owed and such, there is a “credit reporting agency” that keeps track of your habits.  If you are a person who pays your bills late, that is noted, and can be checked on by potential creditors for a number of years down the road.  Then again, if you pay on time, or pay more than what is due, that is also noted in your records, and it shows potential creditors that you have the potential to be very responsible with debts.

In short, in the USA and other countries, it is very easy for a company to check on your payment habits, and decide if you are the type of person whom they wish to extend a loan to.  If you have a good record with borrowing and repaying money, there is a good chance that you will get additional loans.

Last week, I got an e-mail from somebody that has to do with Credit Reporting Agencies.  It’s an issue that I know about and have dealt with before.  Here is a slightly edited version (I don’t want to give the personal information of the person who inquired) of the e-mail I received:

Hi there, I am realtor in Canada and am helping a client who
moved from the Philippines to find a home. The banks are asking for a
credit bureau from the Philippines, but it seems that this is a
difficult task. What is the best way to show a credit bureau or
credit information for the past year. Where would my client request
this information and how difficult is it to get?

Well, you see… the problem this person is facing is that there is no such thing as a credit reporting agency, or credit bureau in the Philippines!  Yes, you read that right, they don’t have a way of tracking you if you don’t pay your bills, or no way of seeing your credit worthiness if you do pay your bills!

Additionally, if you have great credit in the States, there is no way that you can “transfer” that credit here, so that people know that you are honorable in paying debts that you know.  Again, if you leave the States owing a bunch of money, that also cannot get onto your “record” here, because basically there is no record!  Now, let me say, if you owe enough money there, and try to skip out on it by moving to the Philippines, that could still lead to trouble for you, because if you owe enough money, they might just track you down, and still come after you here (if the amount owed is enough to justify the cost of doing that).

Now, even though there is no credit reporting here, there still is one way that bad (or good) credit could affect you here.  That is if you are dealing with the same company, or a sister company.  For example, Smart Telecommunications is a subsidiary of PLDT (Philippine Long Distance Telephone).  If you owe Smart a bunch of money, and skip out on it… when you go apply for a landline at PLDT, they will likely have a record of the fact that you owe money to Smart, and they will catch you that way.  But, if you owe Globe Telecom (another cell phone provider), PLDT would have no way of knowing, because they are two different companies.

OK, so if there is no credit reporting, how do you get a loan?  How do companies decide if you are worthy of the responsibility?  How do they know that they won’t be ripped off?  What they do is that they look at your employment, your salary, and they check if you have borrowed from them before, and how you were on the payments.  You will need to supply other data too, such as a statement from the Police or NBI (National Bureau of Investigation), a clearance from the Barangay Captain (sort of the “mayor” of the neighborhood where you live) that will attest what kind of record you have.  Do you have criminal convictions?  Are you currently wanted?  The Barangay will attest to your character – are you an honest person, or not?  Do you cause trouble in the neighborhood?  If so, it might indicate that you are not the type of person that they want to do business with.

Another factor is that if you are a foreigner, it will be very, very difficult to get any kind of loans here.  If your wife is from here, and has an established record here, she could probably get the loan, but not you.  If you are an immigrant, and have been here for a few years, that is when you might be able to start getting some small credit deals, and thus building a record, but only with the company in question.  For example, if you get a credit card at a certain bank, and show a good record of credit worthiness, then after a year or two, perhaps they will allow you to upgrade to a better card with a higher limit.  Your beginning card, though, even though it is a credit card (as opposed to a debit card) will likely require you to keep a deposit at that bank, as collateral for the credit.  The payments will not be drawn against the deposit, the deposit is just there in case you skip town and owe money.

I suspect that in coming years, but possibly many years down the road, credit reporting and record keeping will make it’s way to the Philippines.  I mean, it is inevitable for it to happen.  Companies can minimize the monetary risk they take with people if such reporting is done, and is centralized, as it is in other countries.  We’ll have to wait and see if it happens!