Home' Trinidad and Tobago Guardian : May 11th 2014 Contents MAY 11 • 2014 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
COVER STORY | SBG5
There is also a steady increase in the number
of refinancing and debt consolidation loans
for the period. Outstanding vehicle loans as
well as loans for travel and domestic appliances
and furnishing also showed increases over the
period for the most part. It is interesting to
note, that Trinibagonians were also getting
into debt to make investments.
The bulletin shows the number of outstand-
ing loans for education, the purchase of finan-
cial assets and real estate mortgages also
increasing over the period.
J Thomas Escalante, the general manager
of TransUnion, told the Sunday BG in an e-
mail response to questions that "if the financial
industry, in general, is seeing default rates rise
as well as credit balances, that could be a
A warning signal that as a people, debt is
becoming a permanent part of our cultural
and financial landscape.
The TransUnion office in T&T, which trades
under the name Credit Reporting Services Ltd,
is a subsidiary of TransUnion, Chicago, which
specialises in providing credit scores.
What you do owe can hurt you
At one point, Steve told the Sunday BG he
had three loans, from three different lending
institutions. When asked how he was able to
do this, Steve said it was easy to exploit a sys-
tem that had relatively few checks and balances.
He mentions one specific financial institu-
"All you need from them is proof that you
have a job for more than five years and a salary.
They will give you the loan according to your
financial ability to repay. The search history
of these institutions is poor; there is not a
collective thing. Let us say they will type up
my name on this computer, most times it will
not come up that I have three different loans
from three different banks. That doesn t work
However, debt collectors and credit reporting
agencies are saying this behaviour is becoming
a thing of the past. Marhue said that the global
economy means more foreign entities are doing
business in and with T&T. This creates a need
for integrated credit data.
He said while Credit Chex is still to make
this move, at least one of its competitors has
become linked with several reporting associ-
ations in the US. This makes it easier to locate
people who have borrowed large sums of
money and have left the country.
Marhue also said Credit Chex has its "Big
Bad Book" of debtors which contains 65,000
names. Consulting the database, he said, is
becoming standard with several businesses in
South America who have had local companies
skip out on paying bills for goods supplied
Individuals with a history of debt are also
more likely to have the trail picked up by insti-
tutions like TransUnion.
Escalante, general manager of the T&T
branch, explained that a credit score is a three
digit number, derived by using a mathematical
formula from all the information in an indi-
vidual s credit report. The mathematical for-
mula is called a credit scoring model. A credit
scoring model attempts to predict the likelihood
that a borrower will default on a loan, which
means being 90 days past due for payment.
A credit report, meanwhile, will contain
information like how many accounts does a
person have, how much was borrowed and
how promptly payments were made. Escalante
said when someone applies for credit, their
payment history would be the most influential
in determining their eligibility, followed by
age and the type of credit being applied for,
then the percentage of a person s credit limit
used over a period of time, their total amount
of debt and lastly, recent credit behaviour and
When the credit scoring model is applied
to someone s credit report, the result is a
credit score. The TransUnion general manager
said scores range from 150 to 950, with 150
being the lowest and 950, the highest.
TransUnion advised anyone who may be
curious about their credit score to visit their
office to check their score at least once a year.
This way errors in their credit report and
score can be corrected quickly.
According to Escalante, those with good
scores are able to have credit approval process-
es expedited, without having to provide as
much proof of good financial management.
On the other hand, he said those with low
scores are not able to access the best interest
rates when they borrow, which means that
they end up paying more over the life of the
While TransUnion provides scores to
lenders, the organisation wanted it to be clear
that it does not advise whether someone
should receive a loan or not. The credit report-
ing agency said such decisions are made
according to the institution s "risk appetite"
and ultimately they are the ones who deter-
mine whether a credit score is good or bad
for their purposes.
If Credit Chex has its way, debtors may not
even be able to visit other countries. Marhue
said that the company has sent copies of its
bad book to the US Embassy, with the sug-
gestion that it be used to deny visas to people
who owe money.
"It is something we have tried to encourage
... but so far we haven t had any official
response." he said.
In the event that the US Embassy does make
the credit collection company s suggestion
policy, Quamina gave some signs when some-
one might be headed for debt trouble. The
first is that 30-40 per cent of one s salary is
being used to pay bills, termed a "high debt
Juggling bills, something Steve admitted
to doing on a regular basis and, paying bills
after their due date is a warning signal. Con-
sistently borrowing money from friends and
relatives as well as liquidating assets or access-
ing savings to pay monthly commitments is
also something to watch for.
Quamina said if one is already in debt,
spending on all non-essential items must stop.
He said bill payments must also be re-organised
to eliminate the smallest debts first.
In telling their stories to the Sunday BG,
both Jane and Steve spoke of how lending
institutions became "hostile" and "conde-
scending" after they took the loans and when
they began to run behind on their payments.
Jane in particular thought the bank should
have dealt more leniently with her given that
she was unemployed for a period of time and
tried to re-negotiate her terms.
However, Quamina said the facts are that
lending institutions do not force anyone s
hands and that the decision to borrow money
is voluntary. He thought the idea that banks
should help people avoid debt in a capitalist
system almost contradictory.
He said instead, people should have a plan
for financial independence, which he defined
as the ability to have all sources of income
taken away and still being able to maintain
one s standard of living for six months.
He also said, as difficult as it might be, peo-
ple needed to develop the discipline to save
regularly and to also acquire financial planning
assistance from qualified professionals.
* Not their real names
From Page 4
Avoiding the big bad book of debtors
J Thomas Escalante
general manager of TransUnion
Links Archive May 10th 2014 May 12th 2014 Navigation Previous Page Next Page