Bad Credit Lists to Swell in April

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Bad Credit Lists to Swell in April


After the nation's main credit bureau instituted tightened rating standards earlier this year, the rolls of persons with bad credit reports on file and available to financial institutions are expected to swell.

According to the Korea Federation of Banks, debtors who have defaulted on loans for more than three months since the tougher standards went into effect at the beginning of January will immediately be added to the federation's list of delinquent borrowers.

That list is expected to increase sharply beginning in April because of the timing of the regulatory change.

The tighter standards call for loans from financial organizations and payment guarantees that are overdue for more than 90 days to be classified as delinquent, regardless of the amount. Only names of persons with credit card bills in default on more than 50,000 won ($39) will be added to the bad credit list.

Prior to the regulatory change, the federation divided the delinquent borrowers into three groups: Those that had loans of less than 15 million won in arrears for more than six months were classified as slightly risky borrowers.

Persons that had loans of more than 15 million won that were more than three months overdue were categorized as risky borrowers; and those with borrowings exceeding 15 million won that had gone unpaid for more than six months were highly risky borrowers.

The tax authorities are following suit.

The National Tax Service currently reports to the federation only persons who owe tax bills of more than 10 million won that are more than twelve months overdue. But the tax agency announced recently that it would lower that criterion to 5 million won beginning in April.

After their names are included in the credit bureau's list, the delinquent borrowers will be prohibited from both taking out new loans from financial organizations and applying for new credit cards.

Financial institutions have ready access to the information via the federation's online information network.






by Kim Won-bae / Oh Jung-hee

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