The impact of inaccurate credit information on bank's secured lending
Credit risk has been identified as the main risk that can result in the failure of a bankdue to ineffective credit decisions. It is, therefore, critical for the banks to conduct creditrisk assessment on new applicants and existing customers in order to determine thelevel of affordability and mitigate credit risk. Consumer credit information plays a veryimportant role in credit risk assessment because it can accurately detect and predictdefault.The aim of this study was to investigate the consequences of inaccurate creditinformation on bank’s secured lending division. The investigation was conducted usingvarious methods to achieve the objectives of this research. This was done through theexploration of literature review relating to research of the management of consumerscredit information in developed and developing countries, and secured lending andinaccurate credit data. A quantitative research methodology was adopted.It was observed that credit risk is seen as the key risk that banks are faced with. It wasfound that inaccurate consumer credit data can have a negative impact on bank’soperations in terms of consumer’s disputes, higher pricing and consumer overindebtedness.In addition, inaccurate consumer credit data impede access to credit byconsumers.One of the general recommendations of this research is that banks should assist intraining the consumers to improve their knowledge of credit report. Further studies inthe area of corporate or business clients are also recommended as the focus of thisresearch was on individual bank’s clients.
Year of publication: |
2009-11
|
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Authors: | Mtimkulu, Z. M. |
Subject: | Credit risk | Consumer credit | Banking industry | Secured lending | Credit bureaux |
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