Credit refers to the borrowing capacity of an individual. It is a measurement of how qualified you are to obtain goods and services and be able to pay them off at a later date, with interest.
Credit is key in real estate. Most buyers require a mortgage to purchase property. As such, it is imperative that you have good credit history – and, thereby, a good credit score – when you're planning to buy or invest in real estate.
In 2008, the Credit Information Corporation (CIC) was established as a centralized database for credit information in the Philippines. Before then, there was no local centralized database of credit history and credit scores, which made resources for credit information limited for banks and lending institutions.
A government-owned and controlled corporation, the CIC can collect credit information from banks, financial institutions, insurance companies, financing companies, credit cooperatives, and utility companies and other businesses that provide loans.
This June 2015, the CIC launched its database and started to collect credit information to compile and make available to creditors. This centralized database is incredibly useful to the real estate industry for the following reasons:
- Banks and creditors now have a one-stop resource for reliable and independently-accumulated credit information. Previously, creditors relied on financial information submitted by the customer, bank records of existing clients, credit bureaus containing only negative information, and asking for information from other banks. Creditors can now more easily determine whether a customer is qualified to avail of a loan, which means that banks will be able to manage their risks better.
- For the customer, this means that they can now shop around for a better mortgage from different banks and lending institutions. Responsible borrowers with good credit will be able to get better rates, terms, or larger loans altogether by presenting their credit history from the database. Good borrowers will also benefit from faster loan processing and can do away with collateral.
- The database can also provide credit histories based on bills payment. Even if the customer doesn't have a credit card, his monthly payment for electricity, water, and phone bills are noted in his credit history.
About Jay Castillo
Jay is the founder of Foreclosure Philippines
where he shares real estate investing tips and foreclosed property listings. He quit his job as an I.T. Manager to focus on Real Estate Investing and Internet Marketing. He is a PRC licensed Real Estate Broker (REB License # 3194)