Original article available in Russian

"Scoring systems can only operate properly when there is efficient cooperation between banks and credit bureaux."

The following is an extract taken from an article in Russia's Popular Finance Magazine, who asked Peter Brooker, Head of Public Affairs at Experian, about how this process will develop in Russia.

Q. What are the perspectives of credit bureaux in Russia? Which country can Russia be compared to in this sense?

A. I think several parallels can be drawn here. But first, I’d like to say a few words about the differences associated with the legislation in each country. For example, credit histories cannot be disclosed by law. In America, credit bureaux use information from different sources and this information is often not standardized. In Great Britain, our bureau receives information directly from banks. We are told which credit products are used by a specific customer, whether he pays on time, what he owes and so on. But in spite of all the differences, the main concept behind the credit bureau is universal. In a number of countries you can only store negative information on clients, in some places there are restrictions on the amount of information you can store, etc. As for the development of credit bureaux in Russia, I know that banks are not always very eager to share information. We used to see something similar in Great Britain. But even the information we received then positively affected the decisioning process for banks. So I think the timeliness of this work will also be acknowledged in Russia. I can also understand the concern of bank customers who fear that information on them transferred to the credit bureau may not be very well protected. However, our experience in Great Britain confirms that there are good perspectives here. The important thing is for all parties to meet the conditions of information exchange and its protection. Comparing Russia to other countries I can say that Russia’s concept of developing credit bureaus is somewhat similar to countries like Italy, Estonia and Bulgaria. I would like to reiterate that everything depends on the legislation.

Q. What results has Experian-Interfax managed to achieve to date? How many banks are your partners? How has this partnership affected the quality and convenience of services received by private customers?

A. There are over 150 Russian banks that contribute information to the Experian-Interfax credit bureau. At the same time, the bureau is aimed at information exchange. Not all banks and not always can relate to that principle but this specific approach benefits both banks and their clients. We want to get everything at once, including an instant decision on a loan and even a mortgage. And today we have that opportunity. Without a credit bureau, these instant decisions would not be possible. Another side to the operation of a credit bureau is storing positive information on clients. In most countries, including Russia, our bureaux store huge amounts of positive information on borrowers. For example, a bank makes an inquiry and sees that a person has been diligently paying out his car loan and a mortgage, that and he has two credit cards which he pays back interest and monthly installments for on time. The bank likes this person and it gives him another loan. Without such detailed information from a credit bureau the bank would not have a sufficient basis to lend you money. Instead it would fear you would not pay it back on time. I would like to give you a car-specific example. What do you do when you want to buy a car? You look at its appearance, check under the hood, check the mileage (if the car is used) and you also want to make sure the body is not rusted, all buttons are working and the engine does not roar. Banks do a very similar thing when they check out a potential borrower with a credit bureau. The more positive information the bank receives on you from a bureau, the quicker and happier it will be to give you a loan. The less good things it finds out, the more reluctant it would be to see a potential customer in you.

This interview featured in Popular Finance Magazine, Russia on January 31, 2007.

View the original article here

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