New credit system to impact personal loans
- Source: Global Times
- [07:53 February 26 2010]
- Comments
By Wang Xinyuan
Chinese banks will decide whether or not to grant personal loans based on a quantitative credit reading for the first time, with a personal credit scoring system expected to be available within the year.
The Chinese Academy of Sciences (CAS) has been developing a personal credit scoring model for the People's Bank of China since June 2006, said Shi Yong, the executive deputy director of the CAS Research Center On Fictitious Economy & Data Science.
The scoring system is expected to be available within the year, Economic Information Daily (EID) reported Thursday, citing Zhu Min, the deputy governor of the People's Bank of China, at a press conference of the CAS Wednesday.
The CAS model analyzes a person's age, income, credit history and other indicators and works out a reading through sophisticated computation, somewhat similar to the credit scoring model of Fair Isaac, a US-based analytics and decision management technology provider, but with minor differences, Shi said.
A score between 350 and 850 under the US model and 350 to 1000 under the Chinese model is one of the differences, Shi said. He added that the CAS is only responsible for the model's development and maintenance while the central bank will be in charge of database management, including personal information.
The scoring system will help the banks save costs in assessing credit risks, and also provide quantitative readings support for them to make loan decisions. It will also help consumers understand clearly on what basis banks will decide whether or not to grant a loan.
Without credit scores, "there is no clear-cut boundary for our granting the loan," said Zhang Yu, a credit officer at Bohai Bank.
"If you have a poor credit record, we need to file report to the bank's higher level managers and then decide whether or not to grant you the loan," he said. Zhang added that different banks may make different decisions on granting preferential terms on loans.
The scoring system will be a major basic reference for banks and could be adopted by other financial institutions such as insurers, Shi said.
Shi said that two or three scoring systems might be possible in the future to ensure diversity and give customers more options.
But decisions on who will administer the new scoring systems – and how – are up to regulators, he said.
The PBOC was not available Thursday to comment.
Asked about the leaking of personal information, Shi said that there would be new laws and regulations to protect the interests of citizens.
The scoring system is based on the PBOC's current personal credit information da-tabase, which covers 650 million people and has over 100 million people's complete data information for credit analysis, the EID cited Zhu as saying Thursday.
The PBOC's current personal credit system contains information such as personal borrowing and default records reported by commercial banks. Individuals must present their identification at the central bank to receive a copy of their report.
Normally, poor credit records can't be modified or deleted, but a person with a poor credit record due to late repayment of credit card bills can have the poor record erased after two years of making timely payments on the credit card, a PBOC customer service clerk said.
