The two-year trend of improving Russian credit health continued in Q1 2018. Following a slide that lasted four and a half years, the FICO® Credit Health Index for Russia began climbing in April 2016 and climbed another 2 points last quarter, from 92 to 94.
What does this mean? Just as millions of Americans check their FICO Scores to see how their credit is doing, FICO and the National Bureau of Credit Histories (NBKI), Russia’s leading credit bureau, keep tabs on the health of Russian consumers. The FICO Credit Health Index measures Russian credit health, based on the percentage of consumer loans and credit cards reported to NBKI that are delinquent by more than 60 days.
The base was set at 100 in July 2009, and it climbed until the end of October 2011. Then came the long fall, which was arrested in early 2016.
What happened? “The biggest impact to the index came as Russian lenders and their customers embraced a new kind of credit product: the credit card,” said my colleague Eugene Shtemanetyan, who manages FICO’s operations in Russia. “Unfortunately, late payments here didn’t carry the stigma or penalties of late payments on secured credit, such as a mortgage or car loan. It took awhile for the Russian market to understand the importance of timely card payments, and for Russian lenders to adjust their customer risk management practices. The market stabilized, and loans issued in the last three years are higher-quality than the ones from the years prior.”
Risk management is still very much a priority for Russian credit grantors. “The main risks for delinquency remain the same — a decrease in real incomes,” said Alexander Vikulin, CEO of NBKI. “Therefore, lenders need to continue to closely monitor market indicators such as the PTI (payment to income), as well as to monitor the financial behavior of borrowers for all types of loans.”
FICO and NBKI provide Russian creditors with data to help them better understand how the credit market is developing and to build quality loan portfolios. FICO Scores, available through NBKI, are used by more than half of the leading Russian banks.