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FICO China?

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FICO China?

I was readng that FICO is also used in China, is it the same type of FICO scoring that is used here?




Message 1 of 13
12 REPLIES 12
Legendary Contributor

Re: FICO China?

How is credit scoring "used" in China?  Do you mean that data from U.S. CRAs can be used by those in China to retrieve credit scores?

Or do you mean that China has scoring for its own consumers?

China has no centralized credit reporting agencies, so any use of FICO scoring algorithms would be useless in generating scoring of consumer actions by its citizens.

 

I am curently residing in the Philippines, which also has no credit reporting agencies, and credit scoring is virtually unknown. 

With all the complaints we have about the US credit scoring system, imagine not having one.  It is a totally subjective system of credit approval, and drives interest rates through the roof.  The standard rate on loans in the 'Pinnes is around 12% PER MONTH, due primarily to the inability to evaluate consumer risk.

Message 2 of 13
Moderator Emeritus

Re: FICO China?

It's not the FICO as we know it. If you take a stroll in FICO's press releases, you'll see that they operate in many other countries. From what I read it's mainly analytics for different industries, etc.

Message 3 of 13
Member

Re: FICO China?

Actually, it is not true that China has no centralized credit reporting agency.  In 2008 the People's Bank of China (Chinese Central Bank) established the government owned and controlled consumer credit reporting agency China Credit Reference Center.  Law and Central Bank policy dictates that no bank may ever conduct a consumer credit transaction without conducting a CCRC lookup. 

 

In many ways, China's credit reporting system is superior to that which we have here.  The data requirements are more stringent and every commercial bank is obligated without exception to report all consumer transactions to the CCRC.  Credit reports issued by the CCRC contain much more data than the credit reports we obtain from Equifax and the like.  Consumers may access their credit file without charge at any time. 

 

One of two interesting aspects that I find interesting is that in China, unlike in the U.S., if you are just one day past due it is reported as a late on your credit report.  Also, the CCRC maintains both a credit watch list and a credit black list which incorporated in the credit reporting system.  I am not certain offhand what the exact criteria are for being placed on the credit watch list, but I do know that if one has a chargeoff of any form the CCRC places an annotation on one's credit file that prohibits any bank from extending credit to the individual. 

 

As for FICO scoring, it is not used in China for consumer credit transactions.  There is talk that the Central Bank may implement a credit scoring system sometime down the road, but right now each individual bank either has no numeric credit scoring system in place or else uses their own proprietary scoring system.  Even those that do use their own proprietary system do not use a credit score in the same way that banks in the US do.  It is not used for credit approval nor for establishing credit limits, but rather as a novelty item to determine which customers have VIP status.  It is also not used to set interest rates since they are set by the Central Bank and cannot generally fluctuate in consumer credit transactions.  The way scores are used -- if at all -- may, however, change in the future. 

Message 4 of 13
Super Contributor

Re: FICO China?


@0p3raGh05t wrote:

Actually, it is not true that China has no centralized credit reporting agency.  In 2008 the People's Bank of China (Chinese Central Bank) established the government owned and controlled consumer credit reporting agency China Credit Reference Center.  Law and Central Bank policy dictates that no bank may ever conduct a consumer credit transaction without conducting a CCRC lookup. 

 

In many ways, China's credit reporting system is superior to that which we have here.  The data requirements are more stringent and every commercial bank is obligated without exception to report all consumer transactions to the CCRC.  Credit reports issued by the CCRC contain much more data than the credit reports we obtain from Equifax and the like.  Consumers may access their credit file without charge at any time. 

 

One of two interesting aspects that I find interesting is that in China, unlike in the U.S., if you are just one day past due it is reported as a late on your credit report.  Also, the CCRC maintains both a credit watch list and a credit black list which incorporated in the credit reporting system.  I am not certain offhand what the exact criteria are for being placed on the credit watch list, but I do know that if one has a chargeoff of any form the CCRC places an annotation on one's credit file that prohibits any bank from extending credit to the individual. 

 

As for FICO scoring, it is not used in China for consumer credit transactions.  There is talk that the Central Bank may implement a credit scoring system sometime down the road, but right now each individual bank either has no numeric credit scoring system in place or else uses their own proprietary scoring system.  Even those that do use their own proprietary system do not use a credit score in the same way that banks in the US do.  It is not used for credit approval nor for establishing credit limits, but rather as a novelty item to determine which customers have VIP status.  It is also not used to set interest rates since they are set by the Central Bank and cannot generally fluctuate in consumer credit transactions.  The way scores are used -- if at all -- may, however, change in the future. 


Good info, thanks. I can see the credit scoring model as China gets more developed down the line and need to assess the creditworthiness of its people.




Message 5 of 13
Member

Re: FICO China?

I think FICO is going to face insurmountable hurdles in the China market which will inhibit their success.

 

First of all, there is an absence of historical data to use in formulating any type of scoring system.  The government CRA has only been in existence for a few years now so historical data of relevance will be hard to come buy.  Any data older than 2009 is owned by the individual banks which have a solid history of not sharing data amongst themselves. 

 

Then there is the issue of state vs. private ownership of any credit scoring system.  The government has tight control over credit reporting and few doubt that the government will allow private ownership of any credit scoring system derived from pooled credit data.  Generally the government does what they did when they developed the credit reporting system:  bring in establish US CRAs as consultants, pick their brains and use their idea, developed a hybrid system and then send the consultants packing.     

 

If a credit scoring system is developed in conjunction with individual banks, it is pretty much DOA.  There are approximately 15 major and semi-major players in the Chinese credit card market dominated by what they call the Big Four + One.  The Big Four + One are 100% government owned banks and it is extremely unlikely they will use any system other than one owned by the CCRC.  Right now they are developing their own in-house scoring system without any assistance from FICO.  All of the others are what I would term semi-major players and it is here that FICO could possibly gain entry with one or two and help developed a credit scoring system.  Still, the scoring system would be used only by that particular bank and only until the CCRC came out with its own scoring system and forced it upon all banks.  Since there is no such thing as a non-government owned or controlled bank in China, they must toe the government line.

 

Finally, I doubt a scoring system similar to the one FICO uses in the US would produce anything even near accurate results in China.  They would have to develop a system from the ground up.  Mortage data?  Most homes are still purchased with cash in China.  Installment loans?  Very rare.  Length of credit history?  Reliable data only goes back to 2009.  Utilization?  Limits can be so low that very few people use less than 70% of their available credit.  The major stumbling block many believe would be the whole Chinese concept of "social justice" coupled with each card issuer's thirst for market share.  Incomes in the south and costal areas are predominantly higher than in other areas in China and easier access to credit since the credit industry is more developed there.  Government policy would never allow a credit disparity created by a scoring system.  Never.

 

As it is now, each bank has their own internal scoring system, but not like what we are used to in the US.  It is more or less something like:

 

1.  Have Job?  10 points

2.  Government Job?  5 points

3.  Own home?  10 points

4.  Own car?  5 points

5.  Married?  5 points

6.  Length of Residence in City?  5 points

7.  Money in Our Bank?  15 points

 

... etc ...

 

Then they look at your credit file and as long as you do not have a negative history or a credit ban / alert issued by the CCRC, chances are you'll be approved for a not too uncommon limit of about $750.

 

   

Message 6 of 13
Member

Re: FICO China?

On a somewhat similar note:

 

What do American expats in China do to maintain their FICO credit rating while they're living away from home?

For that matter, how do they maintain usage on U.S. credit cards to keep them open? 

Message 7 of 13
Member

Re: FICO China?


On a somewhat similar note:

 

What do American expats in China do to maintain their FICO credit rating while they're living away from home?

For that matter, how do they maintain usage on U.S. credit cards to keep them open? 


 

It takes a lot of dedication.

 

I use those of my US cards that do not have foreign transaction fees here just to keep them active and, of course, for the cash rebates.  Others can be used to download an mp3 or to buy stuff at Barnes & Noble.  The key is to not let them get cancelled for inactivity.

 

Making on-time payments also requires dedication.  Thank God for services like Remote / Scan Deposit and online bill pay.  Without those it would be truly difficult to make fast, on-time payments.

 

 

Message 8 of 13
Member

Re: FICO China?

 

If you use online statements and billing, do you still have to maintain a US address in order to keep card issuers happy?

Message 9 of 13
Member

Re: FICO China?


If you use online statements and billing, do you still have to maintain a US address in order to keep card issuers happy?


Yes.

 

With some issuers such as USAA and Navy federal, they will report to your US home of record, but allow you to use your overseas address for all other purposes.

Message 10 of 13
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