So, you’ve come to the bank with an intention to obtain a loan, maybe, not the first time, and it is clear that initially you study the terms of loan agreement. You are primarily interested in the loan interest and repayment terms. However, you notice that the text of the treaty has such a line: the bank has the right, and the borrower agrees to transfer information about his credit report to the credit bureau. The bank has right to receive the credit report during the entire period of the contract.
Of course, you have a question: What is the credit report and what is the credit bureau, which transmits information about your credit report?
Credit report- is the complex of information about the juridical or natural person, which contains information about the execution of obligations under the loan contracts.
Credit bureau – is a legal person, sole activity of which is the collection, storage and use of information – credit report.
One of the main problems of relationships between banks and borrowers is the lack of full reliable information about a borrower.
Each bank keeps special and expensive services, the task of which is to collect and check information about the mutuary, his financial position, the presence of other obligations, how he repays other loans, etc.
On the other hand, a debtor with a good credit report is not able to persuade the bank to take into consideration this report, when determining the bank interest rate on the credit because the bank demands an objective, not subjective, assessment.
World experience shows that there is a very efficient and proven way to establish a new approach to the relationship between lender and debtor through the establishment and functioning of credit bureaus.
Bureau raises the level of bank’s data about potential fund receivers and gives an opportunity of a more accurate forecast of repayment of credits. Bureau allows reducing the charge for the search of intelligence that the banks made from their consumers.
Bureau creates a kind of disciplinary mechanism for debtors. Everybody knows that in case of noncompliance with obligations their reputation in the eyes of potential lenders will fall. This mechanism also enhances the stimulus of the mutuary to return the loan, reducing the risk of misconduct.
Not very long ago loans were affordable to many people and they didn’t miss this chance. To be on the safe side they have to check their credit reports. This is very useful task but it may seem hard for somebody. It is possible to use credit monitoring service – they will help you to understand the reports clearly.