Positive Credit Register, or Comprehensive Credit Reporting (CCR), is a record that collects all of a person’s loans in real time. This means that, for example, when applying for a loan, the finance company or bank would not only see the customer’s potential default entries in the credit history, but the lender would be able to see the borrower’s loan amounts and capital in real time and see the applicant’s income.
Finland is one of the few European countries that does not yet have a positive credit register. In addition to Finland, it is not only used in Denmark and France. For example, in Sweden, the credit history register contains information on the applicant’s debts, income, property holdings and payment behavior.
In Finland today only the so-called. Negative Credit Register, which is a check of a customer’s credit history for default payment entries. However, the default payment entry does not match the applicant’s real-time information, as it takes several months to obtain the default payment entry, and in the meantime the borrower may have become even more indebted without any indication in the credit register.
When applying for a loan or loan, it is important that the lender is able to base the credit decision on real-time and truthful information as possible. However, at present, the process is mainly based on trust, as the creditor has no reliable way to verify the information provided by the client on his income and debts. In fact, Finnish law does not allow creditors to set up electronic registries to verify taxpayers’ reported income.
However, almost all lender requests the applicant to provide proof of income in the form of a slip and debts by tax assessment. These are especially required when applying for slightly larger loans. However, in today’s digital world, such as a paper war sounds like a very cumbersome and outdated method that could be avoided by using a positive credit register.
This would speed up the process of obtaining the information through an electronic database, as the lender would be able to retrieve the information directly from the database and the applicant would avoid providing the lender with the necessary paperwork.
Usually a default in the credit register is an absolute barrier to getting a credit card and getting a loan. However, there are some service providers, such as Svea, which offer loans without credit history. In this case, however, the default payment note must not be fresh and must have been paid for.
A positive credit register would allow a broader assessment of the consumer’s financial situation, since the lender would see the customer’s true payment behavior and the credit decision and interest rate would be more in line with each customer’s genuine payment behavior.
Currently, lenders have to base their credit decisions and pricing on averages because there is no real information on customer payment behavior. As a result, decent customers suffer from higher credit pricing, while lazy payers benefit from the current model.
With a positive credit record, customers would be able to demonstrate their true solvency to lenders through good payment behavior, thus benefiting, for example, from better credit pricing.
A positive credit register has not yet been introduced in Finland, largely because the current model has been shown to work well. In addition, a positive credit record has been found to violate privacy. However, Ruuska and Pättiniemi state in their HS article that both of these reasons are poorly reasoned, as tax information, for example, is already public. So why not keep a register of them for the lender?
The current negative credit register model in Finland is outdated and there would be a need for reform, since a positive credit register would be beneficial to both the consumer and the lender. In 2017, the Federation of Financial Services has also given the green light to the establishment of a positive credit register.
For example, Australia switched to a positive credit register in 2014. Would it be time for Finland to follow in the footsteps of the rest of Europe and the world and move to a positive version instead of a negative credit register?