The existence of Credit Bureaus is relatively new in Nigeria and some parts of the world. Even though many people may have come across the term ‘Credit Bureau‘, while partaking in their daily routine activities such as listening to the news on television or reading a financial article, they often do not reflect on the importance of Credit Bureaus, what they stand for, how they affect their lives or the economy as a whole. This article will assist to answer the question ‘What is a Credit Bureau? And where data is obtained.
In 2019, one of our communication objectives was to create awareness about our corporate brand; CRC Credit Bureau Limited, and the many credit products and services that we have to offer to not only lenders/creditors but to individual borrowers as well. This was to enable consumers in Nigeria to take control of their financial reputation by proactively requesting their credit report and/or score before approaching a lender or provider of postpaid products and services.
By knowing this information, one can improve the standard of living by being accessible to lenders who require “good” customers and the opportunity to correct errors prior to loan requests that ultimately lead to denial/decline by lenders.
Our focus is to consistently deliver value to our partners resulted in educating consumers in Nigeria and diaspora about credit and its inherent advantages and sometimes, disadvantages to their financial lives. We deployed our communication materials via many channels and received feedback from some respondents who enquired “Who are you and what is it you do?”.
It became critical to ensure that the knowledge of Credit Bureaus is underpinned by providing empirical information to support the importance of our existence and the change we bring to the quality of life of many consumers.
The question remains what is a Credit Bureau?
There are many definitions to answer this very simple question and these are to mention a few:
A credit bureau is an agency that collects and researches individual credit information and sells it for a fee to creditors so they can decide on granting loans (Source: https://Investopedia.com).A credit bureau is a company that collects and maintains individual credit information and sells it to lenders, creditors, and consumers in the form of a credit report. (Source: thebalance.com)
A credit bureau is a data collection agency that gathers account information from various creditors and provides that information to a consumer reporting agency (Source: https://Wikipedia.com)
A credit bureau is one of the two main types of credit reporting institutions. It collects information from a wide variety of financial and non-financial entities, including microfinance institutions and credit card companies, and provides comprehensive consumer credit information with value-added services such as credit scores to private lenders. ( Source: https://worldbank.org)
In all these definitions, there are two terms that are consistent: a collection of data and decision making by lenders.
Data is simply facts and statistics collected for reference or analysis. Therefore one can deduce that a Credit Bureau is a data collection and analysis company and the data we collect and analyze are facts and statistics of individuals from different sectors of the economy that are made available to organizations when they make lending or credit decisions.
The type of data we collect on individuals includes basic demographic information such as Name, Address, Gender, as well as their credit history, and so on. The data also captures when a credit account is opened, credit repayment history, the amount of credit you have available, the amount of credit you are using, outstanding debts, details on public records like bankruptcy, tax liens, etc. As our credit interactions can be endless, so is the volume of information gathered around these interactions.
Data collected on corporate entities also entail names of the Directors or as we call them, associated parties, as well as information on all credits taken and the circumstances/terms under which they were approved and disbursed.
With all the data, the next question would be we where do we get this information from? Credit Bureaus depend on financial and non-financial institutions to provide them with consumer and corporate information as data providers.
We are often unaware that many organizations we have credit/post-paid transactions with, submit our data to Credit Bureaus. In Nigeria, Credit Bureaus can source data from all or any of the following sources:
- Banks operating in Nigeria
- Mortgage Finance Companies
- Finance/Operating Leasing Companies
- Insurance Companies
- Institutions that offer credit to medium, small and micro enterprises
- Asset Management Companies
- Suppliers of goods and providers of services on a postpaid or installment payment basis e.g. telecommunication,
- Utility Providers such as water, health, energy, etc.
- Other Credit Bureaus
- Other entities that have data and information that serves the purposes of the company
Source: https://www.cbn.gov.ng/OUT/CIRCULARS/BSD/2008/GUIDELINE
The next question would be, what do we do with all this information and why do we exist? This will explain what the core functions of a Credit Bureau are and why they are important to both Lenders/Creditors and Borrowers in our next blog post. Stay tuned…