Credit rating agencies measure the financial health of millions of Dutch people. Their scores determine whether you qualify for a telephone or energy subscription, a loan, credit card or mortgage. As soon as you buy something on payment, it is predicted how great the chance is that you do not pay. Those scores are opinions; clients can not automatically take over without a person looking at them. In practice this is different: mortgage lenders block customers with negative credit registration, telecom providers often designate an external credit check as a reason for a rejection.
In the outside world, negative stories dominate about rating agencies. Being rejected is annoying. It stresses that agencies collect personal data that is used against you at critical times. If you loose a payment arrears, the ‘negative registration’ haunts you for another five years. Correcting mistakes takes a long time, so people can miss a mortgage or a dream home.
Credit rating agencies are complaining about lack of understanding. They think that they have a social task: prevent people from being too deeply indebted. They also see themselves as an economic lubricant for their clients: credit providers, telecom providers, energy companies, leasing companies and web shops. And complaints? According to the evaluators, it is ‘only’ a few hundred per year, on millions of reviews.
To cut yourself in the fingers
The Credit Registration Agency (BKR) in Tiel legally obliges the data of 10.5 million Dutch people. You will be included in a file there as soon as you take out a personal loan or credit. From 250 euros onwards, credits must be reported; if your telecom provider forwards your new device, for example. The BKR also counts the number of reviews you received in the past year. But the same ‘shopping rule’ also means that consumers who compare personal loans – in search of favorable rates, for example – are punished with a lower BKR score. The credit registration agency therefore wants to adjust its scoring method. When the new weighting comes into force, it is not yet known.
The score awarded by the agency, based on various criteria, indicates the probability that someone will be in arrears. In this calculation, it counts how often credit providers test someone in the previous twelve months. The BKR uses two ‘scorecards’ (statistical models). One person predicts the probability that you will have a payment arrears in 18 months, the other the chance that this will happen in the course of 18 months. That way, financial institutions keep an eye on their client portfolio.
Banks use the BKR to gauge the financial health of their customers. Whoever pays out a continuous credit or credit card expenditure without problems, therefore increases his BKR score. The disadvantage is that the maximum amount of loans to be borrowed decreases due to other outstanding credit.