THE WAY THE BANKING IS wired at the moment, there seems to be no real and lasting happy ending to a bad credit history. Bankers admit that Filipinos who have made credit card mistakes, bounced checks or have messed up their credit records one way or another will have to live with the hit on their name in banks? databases for virtually forever.
Marissa (not her real name) is a self-confessed bad creditor who has turned a new leaf. She thinks mistakes happen all the time, and not being able to make up for them is unfair. Now that prices are going through the roof, a responsibly used credit card can make all the difference between eating and starving between paydays. Or at least being able to buy a child?s book or art supplies for school.
?I admit I was a bad borrower. I was young and I made mistakes. But instead of helping us, this bank charged me with very high interest. After that, my mom got sick and I needed to help the family, so the charges and the principal grew and grew,? she says.
Marissa eventually found a way to pay off her debt, chunk by painful chunk. It took a long time, yet even after her successful ?graduation,? she was denied every time she applied for a new credit card, and she couldn?t open a checking account. She didn?t try getting a car loan or personal loan, anymore.
?I stopped trying after a while. I don?t know if there?s anything I can do to change the past,? Marissa says.
Karen, on the other hand, says her problems started on a foreign trip when her friend asked to ride on her credit card. ?I was a revolver, but I paid at least the minimum. When my friend couldn?t pay her purchases charged to my card, the very high interest kicked in and at one time my bill went up to P200,000. I eventually paid off everything?she paid but very late?the damage was done. I was already on the negative list,? Karen says.
As of now, banks rely on the Bankers Association of the Philippine?s (BAP) so-called negative list to identify bad borrowers. Once you?re on the roster, you?re there forever. Individual banks have their own hot lists, but the contents of these are closely guarded.
That can all change if a bill on creating a centralized Credit Information Bureau authored by Sen. Edgardo Angara and his son Rep. Juan Edgardo Angara is passed, signed into law and fully implemented. The idea is to have something similar to the Experian, TransUnion and Equifax services in the US, where banks can use a reliable, common database so that they can lend faster, require less collateral and charge lower interest. In the US, consumers can also access their own credit records for a fee, and check for errors.
Until the bill turns into law and is implemented, bankers say there is little those who have a hit on their name can do but fix their financial habits.
?[Filipinos] need to be aware that without putting an effort to maintain a good credit history, they will not be able to borrow from legitimate lending institutions and could find themselves open to unscrupulous lenders,? says Suresh Nanoo, senior vice-president at HSBC and head of the personal financial services division.
If you are one of those who find yourself in the deep end or you have a loved one who does, here are a few things that you can do to fix the past:
1. Admit your mistake. From a business standpoint, banks will make more money from you if you recover from that low point.
They don?t like advertising that they restructure debt because it?s prone to abuse, but banks admit that they give lighter payment terms if the customer has a ?genuine desire to settle??even if the period is protracted, says Nanoo. An official from another bank says you might even get brownie points if you call your bank and don?t wait for them to call you. Hiding from creditors has never done anybody any good.
2. Pay your debts. If you are given another chance to pay your arrears, make good on your commitments. The whole game plan is to rebuild your credit score, and that won?t do with another wave of credit card bingeing. Nanoo says over the years, Filipinos have been more conscious of their credit history. ?Even during difficult times, Filipinos would try to comply with their payables and would even seek bank?s assistance for flexible payment options,? he says.
3. Save regularly?in the same bank. As they say, Rome wasn?t built in a day. Rebuilding your credit score will take some time, but there?s no source the bank will trust more than their own record of your savings account. Sock away money on a regular basis?say P500 or P1,000 a month?into your bank account. The regularity, more than the amount, will show goodwill. Some banks will even give you a pre-approved credit card that can rebuild your record faster if the savings balance goes up high enough.
4. Ask for a written seal of good housekeeping. A handshake and a warm smile from a bank officer is well and good, but a written seal of good housekeeping is better. Keep one in your file and remind the bank to send this file to the BAP. Nanoo says Philippine banks are required to notify the BAP when debts are settled. While the negative record will not be deleted, now you have something to show when trying to apply for financial products.
5. Live within your means. With a written record under your wing, you may think its time too loosen up and spend a little. You didn?t bear those months of self-control to ruin your record again. Florentino T. Gonzalez III, vice president for credit and business analytics at Bank of the Philippine Islands recommends living within your means and borrowing only for the right reasons.
?Filipino borrowers? concern over their credit history varies depending on the persons social background, family background, educational attainment, personal habits and other traits, vices or a lack of it, among others,? says Gonzales.
Rich people are not necessarily good payers, he says. ?[They] wouldn?t care so much about their credit track record, unlike perhaps some of the downtrodden, like the poor farmer, who is very particular about upholding his credit standing, may turn out to be credit worthy,? Gonzales adds.
Life and money always go together, and credit records go awry often when relationships also do. ?Family troubles, impending breakup of marriage may indicate greater risk to compromise their credit history,? the banker says.
It?s hard to fight a bad credit record that you can?t see nor touch. But for now at least, deletion is not the only answer for people who want to change history. Good habits and sincere intent can soften even serious bankers.