Credit Information

What is Credit Information Sharing (CIS)?

Credit Information Sharing (CIS) is a process where banks and other credit providers submit information about their borrowers to a Credit Reference Bureau so that it can be shared with other credit providers. It enables the banks to know how borrowers repay their loans. This is also known as "Credit Reporting".

What is a Credit Reference Bureau?

A Credit Reference Bureau is a company licensed to collect and combine credit information on individuals and Companies from different sources and provide that information upon the request of a bank or other credit provider. Banks can only request a report on a borrower who has actually applied for a loan from them.

Such reports help the bank and credit providers decide whether you as a potential borrower will be able to repay a new loan. If the report shows that you have a 'delinquent loan' - one on which you are no longer making payments - the bank will consider the degree of risk in lending to you. It does not mean that you must be denied new credit, but lenders will be more careful when lending money to you, or may apply tougher lending conditions. The Rwanda National Bank has been mandated by law to license and supervise the operations of such bureaus.

Why is credit information sharing being introduced in Rwanda?

Many borrowers make a lot of effort to repay their loans, but do not get rewarded for it because this good repayment history is not available to the bank or credit provider that they approach for new facilities. On the other hand, whenever borrowers fail to repay their loans, banks are forced to pass on the cost of defaults to other customers through increased interest rates and other fees. Put simply - good borrowers are paying for bad. This is unfair. Credit reporting allows banks and credit providers to better distinguish between good and bad borrowers.

Someone who has failed to pay their loan at one bank will not simply be able to walk to another bank to get another loan without the banks knowing about it. Over time, better information on potential borrowers should mean that it will be both cheaper and easier to obtain loans.

What is a Credit Report?

A Credit Report is a report generated by the Credit Reference Bureau, containing detailed information on a person's credit history, including information on their identity, credit accounts and loans, bankruptcies and late payments, and recent inquiries. It can be obtained by prospective lenders only when they have permissible reason as defined in law, to determine his or her creditworthiness.

What is a Credit Score?

A Credit Score is a measure of credit risk calculated from a credit report using researched credit risk models and formulae. A positive score is characterized by timely paid bills, timely repaid loans and advances, maintaining steady employment, a clean public record etc. On the other hand, a negative credit score is characterized by late or defaulted payments on outstanding loans and advances, bankruptcy, fraud, foreclosures on collateral held by lenders, loss of employment, misapplication of borrowed funds, unpaid cheques and standing orders due to lack of funds etc.

Will your bank tell other banks about whether you are paying your loans?

Yes. If you have defaulted on a loan, then your bank must share this information with all other banks. This is called negative information. In Rwanda the law now requires that banks have to share negative information about their customers with other banks.

What other 'negative information' does your bank have to share with others?

Banks are required to pass on information if your cheque is dishonored or if your account is compulsorily closed. Other information that must be reported includes: proven frauds and forgeries; cheque kiting; false declarations and statements; receiverships, bankruptcies, and liquidations; credit default and late payments; use of false securities; and misapplication of borrowed funds.

What if you are a good borrower?

If you have taken a loan or other credit facility and are repaying it regularly and on time, banks and credit providers can share this information with other banks and credit providers. This is called positive information. The law requires banks to report positive as well as negative information. This is beneficial to you as it increases your credit score, and by extension the value of your "information collateral".

How do banks share information?

Banks must pass on positive and negative information to a Credit Reference Bureau on a monthly basis. The bureau gets updated on any eventual (positive) changes to that information as they occur. Any bank that provides such information is also free to request information from a Credit Reference Bureau on a potential borrower.

How safe is this information about you now that it is held outside your bank?

The law requires that a Credit Reference Bureau meet international data security standards in the transmission and storage of information in their custody. Regular data security audits conducted by the Rwanda National Bank and a bureau that does not keep data safe risks losing its license.

Can you challenge wrong information about you?

Customers have the right to dispute any information about them held in a Credit Reference Bureau. The law and regulations also set out procedures for settling disputes. If a dispute is not settled within a specified time period, the disputed information will have to be removed from the databases of any Credit Reference Bureau. You should send your credit report disputes directly to the Credit Bureau that provided the report containing the error. You can dispute any incomplete or inaccurate information on your credit report.

How long will negative information remain on my credit?

A bureau is required to retain information on non-performing loans until seven years after it is repaid. This does not mean that no lender is allowed to lend the borrower any money during this period. It only means that the lender will take extra caution and negotiating good terms will become more difficult for such borrowers.

How often should I check my credit report?

Your credit history plays a major role when you apply for any type of credit or loan, such as a credit card, auto loan, mortgage, employment screening, utilities deposit and insurance. It is a good idea to know what is included in your credit history before applying for credit or a loan. The law requires a Credit Reference Bureau to supply you with one free credit report per year, and also issue you with a free credit report whenever a bank makes an adverse decision about you using information obtained from a credit report. You should therefore take advantage of the legal requirement to obtain free credit reports. At all other times, you may buy your credit report at a minimal fee from a Credit Reference Bureau.

It is very important for you to update your details with your banks, in order to ensure the accuracy of credit reports. You are also expected to point out errors in the credit report to avoid incorrect decisions on your credit application or inaccurate credit scores.

What information is not in a credit report?

Your credit report does not contain - and the bureaus do not collect - data about race, religious preference, medical history, personal lifestyle, political preference, friends, criminal record or any other information unrelated to credit.

What are the future plans for credit information sharing in Rwanda?

Information from other sources - water, power and phone payments made regularly; tax liens and other claims on spare cash; court data, etc - can also help banks to assess your ability to pay.

Collectively, negative and positive information and the addition of information from other sources is known as full file reporting and gives a more complete picture of you as a potential customer.

Once the basic credit reporting system has been established in Rwanda, it is hoped that we can move to full file information sharing. With better information about customers, banks will be able to make more informed credit decisions, reducing costs and improving approval speeds. This will be good news for both customers and banks.

A good credit record builds good credit terms!