Is there such a thing as good credit?
A 2017 World Bank publication shows at least three in every four Filipinos borrow money from informal lenders. These informal sources are not easy to regulate. In fact, these sectors engage in abusive practices like charging high-interest rates or even harassing borrowers who can’t pay their debts.
It is one of the reasons why Filipinos have a negative notion about taking credit. In this episode, we explored the stigma with the help of Atty. Aileen Amor Bautista, OIC at the Credit Information Corporation (CiC).
Credit can be empowering
We invited a few people to tell us how credit (loans in these cases) helped them achieve their life goals.
Julie, a freelance sales representative at Converge, shares that her bank offered a better financing deal than their car dealership. With the car loan her bank offered, she was able to save money on her car purchase and then earn five times more in commission-based sales every month, with the ease of transport that the car made possible.
Meanwhile, Mike, who started his family at age 33, describes how he was able to buy his family’s first home through a PAG-IBIG loan. Now that their family has grown and they rent out that first apartment, it serves as a source of additional revenue for the household.
Clearly, credit is not something to be ashamed of. It can be a beneficial tool in our financial lives, Atty. Aileen Amor highlights. But being a good creditor is crucial, especially when you may engage with formal financial sectors in the future.
Building a good credit score
In the Philippines, CiC governs the establishment of a credit database to empower Filipinos in building their history of “good credit.”
While our general knowledge about borrowing money involves a pawn or mortgage, having a good credit report can help you take a loan without owning physical assets. A good credit report gives you reputational collateral.
Achieving good credit does not mean you should always pay in full using cash. Atty. Bautista describes that building a good credit score starts with paying your financial obligations on time consistently, over a few years.
The benefits of a good credit score
CiC’s credit history database allows financial institutions to provide consumers with loans at low-interest rates, with better terms and conditions.
Furthermore, the credit registry protects consumers from identity theft as it allows them to download their credit reports and file a dispute when they encounter any erroneous information.
Building your reputation through a credit history as early as possible is a monumentally good idea. It will not only allow you to have access to safe and secure financial options in the future but also help you move up in the world and achieve your lifetime goals.
About the guest:
Atty. Aileen Amore Bautista is the Credit Information Corporation’s Senior Vice President of Business Development and Communications. She is currently the OIC President and CEO for Government Owned and Controlled Corporation.
Listen to the episode here