Tuesday, May 21, 2013

Loans linked to mobile bill payment?

Credit Info Cos Seek Access To Telecom Details To Create Complete Database

Chennai: Credit information companies are seeking access to payment details of mobile phone bills to enable a 360-degree view of customers credit history. Simply put, in an extreme case, if you default on your telecom bill, your credit scores could get impacted, thereby affecting your loan.

Credit information firms collect details of loans taken and repaid by individuals from various banks and financial institutions and form a database comprising credit history of the individual. This database is shared every time the individual seeks loans. As of now, the sharing happens only between lenders and credit firms. “Globally there is a strong correlation between telecom and banking defaults,” Mohan Jayaraman, MD of Experian Credit Information Company, said. “Getting access to telecom payments, besides other things like utility bills, will help us form a 360 degree view of the customer.”

In a nation where there are more mobile phones than bank accounts, sharing telecom details will help improve credit profiling borrowers. However, since privacy issues bar telecom operators from revealing details with outside agencies, data sharing can happen only with regulatory push from telecom operator TRAI and banking regulator RBI. “Telecom service providers are using the CIBIL TransUnion Score for making instant decisions on post paid mobile phone limits,” Arun Thukral, MD, Credit Information Bureau of India (CIBIL) said.

When a consumer applies for a postpaid telephone facility, the service provider will pull her/his credit score and credit history basis the information provided in the application. This information in the credit report and the score will enable the service provider to assess the consumer’s financial standing and assign an appropriate credit limit on the postpaid connection. As of today, telecom service providers do not share any data with credit bureaus.

“Several World Bank studies have indicated that inclusion of reporting of non-financial payment data (alternative data) like telephone bill payment and electricity bill payment records, prove extremely beneficial for making lending decisions-—specifically for the segment not having access to credit,” Thukral said. Sharing telecom payment data between credit information companies will help form a complete view of the individual. “While there are lots of positives in sharing data as a lot of first time borrowers can get profiled meaningfully. However, there is very limited negative aspect which may suggest a telecom default may cost you the loan. Banks will definitely take a calibrated view of telecom defaults for loan disbursals,” Experian’s Jayaraman said. He added that “the process can presumably take reasonable time because of the involvement of multiple regulators.”
Rajesh Chandramouli TNN


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