Buzz
CIC holds immense significance for both customers and banks. For banks, CIC serves as the repository of credit assessments for each customer. For customers, CIC checks help in maintaining control over their credit.
Understanding CIC and Bad Debts
Unraveling CIC
CIC, an abbreviation for Credit Information Center, is the central credit information organization under the State Bank of Vietnam. It engages in activities such as collecting, analyzing, processing, storing, and forecasting credit information to support various functions within banks.
For example, when a customer applies for a mortgage installment with BIDV bank, the bank updates the customer's information on CIC for oversight by the State Bank of Vietnam. Consequently, both the State Bank and BIDV can manage debt activities and assess the creditworthiness of that customer.
So, when customers apply for a mortgage or any other service within a bank, thanks to CIC, the lending institution can examine the customer's information and borrowing history to ensure the customer has a clean credit record before deciding to grant the loan.
Operation Mechanism of CIC
All banks provide CIC with detailed and comprehensive information, including borrower names, loan amounts, and payment histories. CIC synthesizes this data into unified information reflecting the credit history of each individual or business borrower. Therefore, when you apply for a mortgage or any loan, the bank will check CIC to determine if you have bad debts, influencing their decision to approve or deny your loan.
CIC categorizes customers' loans based on different scenarios, and each case has a varying degree, specifically:
- Case 1: Standard outstanding loan balance
This is the case where customers have the ability to repay both principal and interest on time as committed. However, if a customer delays repayment from 1 to 10 days, they still fall under case 1.
- Case 2: Noteworthy outstanding balance
Listing overdue debts starting from 10 - 90 days after the due date.
- Case 3: Substandard outstanding balance
List loans overdue for 90 - 180 days.
- Case 4: Outstanding balance with suspicion
List overdue debts for 181 - 360 days.
- Case 5: Bad debt
List overdue debts of at least 360 days.
Through daily cases, the bank will know how customers are engaging in borrowing activities. Based on that, the bank will make the final decision, ensuring lending activities have the best possible chance of recovering both principal and interest.
What is bad debt? Will the bank lend in case of bad debt?
Bad debt refers to loans that are difficult to collect, where customers fail to make payments as per the set deadlines, extending beyond 90 days, and cases 3, 4, 5 all fall under the category of bad debt.
Activities related to borrowing and repayment at a particular bank are reported to CIC. CIC categorizes different debt scenarios and provides this information to the State Bank for management. It helps banks understand the debt status of customers applying for loans.
Through CIC, bank employees can identify the borrower's case. If the borrower falls under case 1, the likelihood of a successful loan is highest. If the bank assesses a customer consistently paying late for 5-7 days, they fall into case 2. Therefore, the boundary between case 1 and case 2 can transition to case 3, 4, or case 5. Debt scenarios may vary based on the bank's evaluation and the borrowing amount of each customer.
Based on available information, customers in case 2 are generally not eligible for loans. To secure a loan, those in case 2 need to provide evidence for late or non-compliant payments.
For cases of bad debt, from case 3 to case 5, neither banks nor financial companies support loans. It's advisable to wait for two years to have your bad debt status on CIC refreshed and normalized before banks and financial companies consider granting you a loan.
Reasons for CIC Placing You in Bad Debt Cases
When CIC categorizes you as a bad debt case, it's often due to the following reasons:
- Late payments beyond the specified time or non-payment over several months.
- Overdue or non-payment of credit card debt.
- Legal actions taken due to non-payment of debts.
- Insufficient payment capability leading to the risk of collateral being processed.
Ways to Minimize CIC Placement in Bad Debt Cases
When aiming for a high success rate in loan applications, maintaining a clean borrowing history without any bad debts is crucial. Avoid falling into the bad debt scenario by:
- Researching information about the loan, repayment periods, interest rates, and repayment conditions.
- Ensuring you have the ability to repay the loan within the bank's specified time. Ideally, choose a loan with a repayment amount less than 50% of your total monthly income.
- Waiting for at least 2 years after clearing a bad debt.
- Seeking the opinion of bank employees if you have had a bad debt history.
- When using a credit card, ensure timely repayments and avoid exceeding 50% of the credit limit. Maintain this credit score regularly to avoid disruptions.
Here, we've clarified the question of what is CIC. With this knowledge, you'll have a better understanding of credit activities, bad debts, making it easier to borrow with the highest success rate possible.
In addition to understanding what CIC is, Mytour also answers questions about what is Coin investment and what is ICO investment, helping readers comprehend the best and most effective ways to invest in Coins and ICOs.
