Credit Score – Do we have it in the Philippines?

When planning to buy a house or take out a loan for a home, business or a car, we will always hear the term, “Credit Score”.  Acquiring a credit or having additional funds lent is use to help in financial footing, in acquiring a property that requires money the individual does not have in the bank but is able to pay off in a timeframe.

What is a Credit Score?

Credit Score is the number used to determine someone’s capability to manage debt. It is a numerical expression based performed by banks or lending institutions on an analysis of a person’s credit files. It will represent the creditworthiness of an individual if banks or lenders will allow the person to place a loan. This will help the lenders decide to accept, deny or extend credit.

Do we use Credit Score in the Philippines?

Unlike other countries, the Philippines currently does not have a unified system of credit reporting. Even though there is no standard system of credit reporting, the Credit Information Corporation in the Philippines is in charge of credit scoring. And banks uses available credit reports provided to check if an individual is eligible for a loan. 

READ: Are You Ready For A Home?

How does it work?

There are different credit scoring method that lenders use. Basically the credit scoring system will come up with a number between 300-850 with 850 being the highest possible score. The credit scores is influenced by:

  • Payment history – 30%
  • Amounts owed – 30%
  • Length of credit history – 15%
  • New credit – 10%
  • Credit mix – 10%

Why is credit score important?

A credit score will impact a person’s financial transactions and plans. These included mortgages, auto loans, credit cards and even private loans. This is also the basis for lenders to accept  loan application based on the person’s ability to pay. They use it in risk-based pricing in terms of the loan amount and interest rate offered to borrowers based on their probability of repayment.

READ: Are You Financially Ready to Buy A House?

If you are planning to apply for a loan, it is best that you build your credit score as early as you can. This includes paying your bills on time, paying off any existing loans you have and using your credit card smartly to not go into debt.