CDA clients lectured on value of good credit

Have you ever visited a store which posts a sign that reads: “Your credit is good but wee need cash”?

Chances are, this establishment has had encounters with people who do well in obtaining credit but are not as good in establishing a good one. In the end, they would realize nobody trusts them anymore.

Commonwealth Development Authority Board Chair John S. Tenorio said people who habitually fail to comply with the requirements of a loan agreement are more likely to be turned down by lending agencies when they submit future applications.

Amid economic hardships, Mr. Tenorio said people should start realizing the value of a good credit history in their future transactions with both government-controlled and private financial companies.

He explained that it normally takes up to 3-4 years for a person to re-establish his credit history and regain the trust of government and commercial lending institutions, including banks, that he will not fall short on his repayment responsibilities.

However, those filing for bankruptcies have to deal with at least 10 years and pass through a rigid credit investigation in order to obtain a new loan agreement from any financing company or institution.

Mr. Tenorio said this has been the subject of counseling sessions provided CDA clients, especially those who have been missing their monthly payment obligations for loans obtained from the government-owned lending agency.

Since its delinquency rate started shooting up, which reached over 15 percent this year, CDA has assumed a new role other than being the government’s premier lending arm: an educator of its clients on ways to become better borrowers.

Mr. Tenorio noted the importance of a good credit history in a borrower’s future loan applications, while stressing that the move is primarily aimed at curbing the agency’s increasing loan delinquency rate.

According to Mr. Tenorio, financial institutions are very particular in the consistency of the borrowers’ ability to pay their monthly obligations. This is one of the reasons behind the development authority’s decision to mobilize its people to conduct a series of consultations with existing borrowers.

However, the counseling has been initiated by CDA in order to halt the rising number of delinquent borrowers which have reportedly jumped over 15 percent during the January-May period, from 13 percent by end-December 1999.

If the increase in the delinquency rate of the government’s prime lending agency would continue at the first quarter level, it may translate to more than $2 million in unpaid and overdue collectibles from its $80 million portfolio each year.

Records obtained from CDA noted that the financial institution’s monthly collections fell by more than 40 percent from the average $700,000 to only $400,000 during the first three months of the year.

But a big slice of remiss loan payment collectibles are actually caused by the recently-implemented payment scheme which gives borrowers longer grace period to settle their outstanding credit.