One of the challenges in any market experiencing rapid credit growth is getting new borrowers to understand how to manage their credit. The strain is showing in Russia, as shown in our quarterly snapshot of Russian borrower performance, the FICO® Credit Health Index, released yesterday by FICO and NBKI, Russia’s leading credit bureau.
The FICO Credit Health Index continued a year-long slide, falling 10 points to 109 on the scale, 2 points lower than October 2012 and 6 points lower than January 2012. This index measures the overall credit health of the country, based on the percentage of consumer loans and credit cards reported to NBKI that are delinquent by more than 60 days. Since January 2012, this bad rate has increased from around 7 percent to over 8 percent.
What’s happening here? Both NBKI and FICO’s experts in Russia believe that risk management by the banks is as strong as ever. The problem, they say, is with new borrowers. As NBKI CEO points out, the number of consumers in the NBKI database grew by 28 percent last year, to more than 60 million.
For risk managers, this trend would call for segmenting the customer base by vintage and studying performance carefully. If it’s true new borrowers have performance issues, keep in close contact with them, send more reminders, and look for opportunities to provide credit education. The last thing you want is for the nation’s credit growth to prosper at the expense of your profitability.
