Introduction of Personal Credit Scores in Russia Seen Helping Banks and Consumers

Cash, Calculator, Pen

(Paul Goble – Window on Eurasia – Staunton, August 28, 2018)

In the first quarter of 2018, Russian banks turned down 48 percent of applicants for loans and charged those who did get them higher rates than they otherwise might because the banks had no good way to ensure that they were only offering loans to those who would repay them.

But at the beginning of next year, a new law will go into effect requiring that every Russian will be given a credit score much as is already the case in many countries around the world. This will “change the life of Russians,” according to the Russian7 portal’s Ivan Roshchepiy (russian7.ru/post/personalnyy-kreditnyy-reyting-kak-o/).

Up to now, the journalist says, banks have had to do their own due diligence, something that adds to the time it takes to decide on a loan application, leads to higher fees and often keeps applicants in the dark as to why they were denied – and thus without any guidance as to what they might do in the future to improve their chances of getting a loan.

But with a personal credit score, applicants will know more, banks will know it more quickly, and the latter can both make decisions faster and lower rates on good risks because the scores will sort out those who are not. Interest rates should thus fall, and approval rates go up to the benefit of both banks and people.