PGMA signs Credit Information System into law

November 15, 2008 at 4:50 am Leave a comment

This is one of the best financial news I’ve heard in weeks. President Gloria Macapagal-Arroyo has signed the Credit Information System into law, also known as Republic Act 9510. If your eyes are already glazing over, hold on and continue reading.

RA 9510 will lead to the establishment of the Central Credit Information Corp, which will compile data from financial institutions like banks, credit card companies, lenders in an effort to facilitate creditworthiness checks.

CCIC will consolidate data from banks, life insurance companies, credit card firms, government lending institutions and other facilities that provide credit.

Simply put, this means that the country will finally have a system to verify who the good creditors are, and who are always delinquent in paying their loans or debts. Example, you want to apply for a small loan for your start-up business. The bank then will check your credit standing and see if you are a responsible borrower. If you have a good credit standing, the bank can offer you lower interest rates for your loan.

If it so happens that you are one lousy creditor, let’s say, you haven’t been paying your credit card bills on time, then the bank will also know that. Either it denies you the loan or you get a loan but you are charged with hefty interest rates.

Or if you want to get a life insurance, you can get a policy at lower premiums if you have good credit standing. Same with housing loans. If you want to apply for a housing loan, the bank or even Pag-ibig can grant you a loan with lower interest rates.

This is very similar to the FICO/credit report in the US where people with higher FICO scores (750 and up) enjoy lower interest rates than those with low FICO scores (below 600).

I find this Credit Information System good news as this will discipline people in maintaining good credit standing. If you are delinquent in paying your loans, you deserve to be slapped with higher fees. But if you are diligent and responsible in paying your bills on time, then you deserve to be rewarded with lower interest rates.


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