Credit rating is a new tool employed by Citadele Bank to help residents measure their credit worthiness online. Using credit ratings is a common practice around the world. Latvian Commercial Banks Association and Consumer Protection Centre believe this new tool will improve residents’ understanding of their credit worthiness and interest rates of consumer loans.
By introducing the credit rating option and based on the issue of funding, Citadele thereby refuses use of a unified interest rate for consumer loans. Instead residents are offered the option to receive a fairer, individual offer in which the interest rate is based on the financial discipline of each individual consumer.
«The credit rating is formed based on an evaluation and summation of multiple criteria. Having no delays in loan payments, regular and official income and having no major outstanding debts are the main criteria based on which a person can be offered better interest rates on loans,» – notes Citadele Bank’s board member Santa Purgaile.
She notes that age will positively affect a person’s credit rating. For example, loan takers who are 36 or older are usually more responsible than younger people. «Being aware of the most important criteria, a person can improve his or her loan and pay less in interest. When establishing the credit rating, the bank looks at a person’s account and payment history. If a person had debts in the past (paid two years ago), his or her credit rating will be better in comparison to a person who is currently in debt. This new method will improve transparency and fairness towards all consumers, each client will have the right to find out his or her credit rating without undergoing complicated procedures and formalities,» – said Purgaile.
During a press-conference, Latvian Commercial Banks Association’s President Martins Bicevskis admitted that the new approach will enhance residents’ understanding of the criteria used to measure each individual’s credit rating.
«The new tool will help demonstrate that timely payments are closely associated with proper planning of finances and help households to spend more money on planned purchases, not payment of big interest rates. It will help promote more responsible attitude towards payment discipline, which will benefit both consumers and the bank,» – Bicevskis said.
He notes that ever since 2013 consumer loan portfolio in Latvia’s banks has stabilized at approximately half a billion euros threshold. Since then, the loan portfolio has been growing annually by several million euros. Data for the first half-year of 2016 shows that the portfolio of consumer loans and payment cards in banks has reached EUR 509,899. «This proves that residents are interested in consumer loans. It is highly important that consumers can properly manoeuvre among the many loan offers and make responsible decisions,» – Bicevskis added.
Sanita Gertmane, head of Consumer Rights Protection Centre’s Consumer Information and Communication Department, admits that the number of complaints about banking services tends to reduce. PTAC believes that Citadele’s new credit worthiness measurement tool, which was adopted in consideration of recommendations provided by PTAC, the general level of residents’ comprehension of financial services will continue to increase and the number of complaints will continue to decline. «Data in regards to complaints shows that the level of regulation of financial services has improved. We support efforts aimed at enhancing residents’ general understanding of financial services. It is important that loan takers and loan providers take loan services seriously,» – said Gertmane.
It is possible to determine one’s credit worthiness without registration here.