In Botswana, the term “ITC” is a familiar one, often associated with being “blacklisted.”
In the credit market, these institutions are called credit bureaus, where a comprehensive record of individuals’ credit histories is maintained, encompassing both positive and negative financial information.
As we continue with our series on personal credit health, today we look at Credit Bureaus; what they do and how they affect you as a consumer.
The IFC defines a credit bureau as an “institution that collects information from creditors and available public sources on a borrower’s credit history. The bureau compiles information on individuals and/or small firms. Information commonly collected include, contact information, credit repayment records, court judgments, and bankruptcies. This information is collated to create a comprehensive credit report that is sold to creditors and other relevant stakeholders like debt collecting companies, Law firms and tracing companies. Data shared with these stakeholders differ, for example a debt collecting company may only acquire address and contact information while a lender gets both address and contact information as well as credit data. Credit Bureaus develop credit scores using the information they hold on consumers. A credit score is a tool that attempts to predict a consumer’s credit risk/behavior based on their current and previous credit patterns. some scores take into account the age of the consumer. These scores are developed using various models and vary from bureau to bureau.
Currently, Botswana has two major credit bureaus: TransUnion and CRBAfrica. Previously, there were three, including Experian (formerly Compuscan), which ceased operations in the country in 2022. Experian primarily served the non-bank finance sector in Botswana; microlenders and pawn shops.
When individuals apply for loans, credit cards, or rental agreements, their creditworthiness is often assessed by the entities they approach. Credit bureaus play a crucial role in this process by providing reports that assist lenders in evaluating the risk associated with lending to specific individuals. These reports influence decisions regarding interest rates, credit limits, and loan approvals. Credit reports are not limited to lending decisions; they are also utilized by landlords, employers, and insurance companies to assess applicants. In the financial sector, employers sometimes refer to credit reports to assess candidate’s financial stability as part of assessment .
Understanding the contents of a credit report is essential for consumers. Typical information found in credit reports includes personal details such as names, addresses, birth dates, as well as credit account information like types of accounts, balances, payment history, and creditor details. Additionally, credit reports may include collection accounts, public records like judgments, and inquiries made by companies accessing the report. The source of this information is normally public sources like courts and lenders who share part of credit agreements information with the credit bureau).
In terms of data retention, recent regulations stipulate that data on credit reports will be retained for 20 years, in compliance with the Data Protection Act. Previously data retention differed by bureau; some kept the data for 3 years while some kept in up to 7 years. Should individuals find inaccuracies on their credit reports, or feel they have been wrongly listed, they can dispute the record with both the lender and the credit bureau. Once the dispute is resolved, lenders have the responsibility to update the credit bureau records. If disputes are not resolved, the consumer may escalate their complaint with the regulatory bodies or adjudicators.
Bank of Botswana, NBFIRA, the Banking Adjudicator and the Consumer and Competition Authority are some of the institutions available for redress. In Botswana Credit Bureaus are regulated by the Bank of Botswana, any queries on the conduct of a credit bureau can be reported to the Central Bank.
In conclusion, credit bureaus play a fundamental role in the financial system, providing vital information to facilitate informed lending decisions. By comprehending how credit reports are generated and utilized, individuals can take proactive steps to manage their financial well-being. Maintaining good credit habits and monitoring credit reports regularly empowers individuals to navigate financial challenges and achieve their long-term goals.
Some common Q & A regarding Credit Bureaus
Q: What kind of information appears on a credit report?
Credit reports often contain the following information:
Personal information : Full names, Current and former addresses, Birth date, Phone numbers and employment history
Credit accounts: Current and historical credit accounts, including the type of account (mortgage, instalment, revolving, etc.) The credit limit or amount, Account balance, Account payment history, the date the account was opened and closed and the name of the creditor.
Collection items : Missed payments and Loans sent to collections.
Public records : Judgments
Inquiries : Companies that have run your credit report.
Q: How long does personal data stays on the Credit Bureau:
A: In the past the period differed by type of data and the Bureaus that held it. From 2021 going forward it will be kept for 20 years in line with the Data Protection Act regulations.
Q: What if the Bank or lender listed me wrongly in the credit bureau.
A: The first step is engaging the lender who listed you, while at the same time you lodge a dispute with a bureau. The credit bureau will also launch their own investigation with the lender.
If you still feel aggrieved after engaging and concluding with the lender one may escalate to regulators or adjudicators. Banking adjudicator, NBFIRA, Bank of Botswana, Department of Competition and Consumer Authority etc.
Q: How often should one check their credit report?
A: It’s a good practice to check your credit report regularly, at least once a year, to ensure accuracy and monitor for any suspicious activity or errors. In other countries you can request a free copy of your credit report from each of the major credit bureaus annually through authorized channels however in Botswana this is not yet practice.
Q: Will checking my own credit report affect my credit score?
A: No, when you check your own credit report, it’s considered a “soft inquiry” and does not impact your credit score. However, when a lender or creditor checks your credit report as part of a credit application (known as a “hard inquiry”), it may have a slight, temporary effect on your score. High number on enquiries may be seen as multiple loan applications or shopping around.
Tsaone Kabomo is the Founder of Credbase, a credit risk advisory firm. She has over 10 years of experience in the Credit Bureau industry. She completed her MBA with the University of Botswana in 2015 and her Dissertation was on Consumer attitudes towards Credit Reference Bureaus in Botswana.
