A few weeks ago, the Financial Services Commission (FSC) announced an improvement scheme on the Credit Scoring System (CSS). The improved system for credit scoring will be put into effect from the first half of this year. The continuous use of debit cards will help the users to bring up their credit scores, and users of Micro-Credit will have a chance to improve their credit scores by diligently paying off their loans.
Before the FSC adopted this new improved system of credit scoring, people with bad credit were not able to issue any credit card and they often faced many obstacles in using financial services. As more and more people are turning their heads towards issuing debit cards since it helps them to avoid drowning in debts, the FSC considered that this could help those people who had suffered from such hardships.
The major change in the improved Credit Scoring System is that records of debit card transactions are to be applied to the credit rating procedure. The larger scale and amount of the debit card payment will give more benefits to people with poor credits. Specifically, anyone who continuously uses a debit card without any overdue payment can improve his or her credit score.
Let’s say, for instance, that Tom who has a credit score of 8 wants to open a small restaurant. However, because of his poor credit score, he is not able to get any loans from banks or financial institutions. What Tom can do in this situation is bringing up his credit score and take more time to prepare more for opening the restaurant. Tom can get a higher credit score if he spends more than 100,000 won with his debit card for 3 months.
What can you do to increase your credit score?
The first thing you can do is choosing a primary bank and use its products and services consistently. As each bank has its own credit scoring system, they impose a high credit score on customers who have a large number of transaction history at their bank. Furthermore, you need to keep in mind that you always need to avoid late payments. Any record of late payment can negatively affect your credit score regardless of the time period.
Moreover, if Micro-Credit takers diligently fulfill their obligations to repay loans, they will get more chances of increasing their credit score as the credit rating agencies will reflect those records into their credit assessment. This will ease financial burdens of Micro-Credit takers as it will be easier for them to use the services of financial institutions. Experts assume that this new rule will be applied only to those whose credit rating is below 7.
Since most of Micro-Credit takers are not able to use the services of financial institutions as others, the FSC found another way to help those people to get back on their feet other than offering low interest and unsecured loans.
Following with the previous example, Tom can also take Micro-Credit for opening his restaurant and grow his business with investing more capital under this improved system. By diligently paying off his debt, Tom can bring up his credit score, and after then, he can get more help in running his business because he will be able to use financial institutions’ services just like other restaurant owners.
Considering the increasing debts of households and the high inflation rate in Korea, this newly improved credit scoring system is expected to become an actual help to those people who have bad credits. If there is anybody who is struggling with a bad credit score, now is the time to make a call. Let’s spread the good news to all!
By Ju Eun Kim (firstname.lastname@example.org)