Credit analysis: what is it and how does it work?
Surely, at some point you have heard the expression: “he was unable to make a purchase because his credit score is bad”. But do you know what that means?
We all face financial difficulties at some point in our lives, which directly affect and influence our financial planning. One of the most common problems when we find ourselves in this situation is the possibility of having our name tarnished.
In practice, this expression is given to a person who was unable to pay for a certain product or service, and had their name negatively affected by the country's official credit protection agencies.
The consequences of having a bad credit rating are many, ranging from being prevented from purchasing any product, being unable to obtain a credit card, and even renting a property. So, if you find yourself in this situation, we are here to help you!
In this text, we will explain in detail what it means to have a bad credit rating, its consequences, and most importantly, how to clear your name with official bodies so that you don't encounter obstacles to renting the property of your dreams.
Before we begin, we have separated the topics that will be covered. See:
● What does it mean to have a bad credit rating?
● Is it possible to rent a property with a bad credit rating?
● How important is it to clear your name?
● How do I know if I have a bad credit rating?
● How does credit analysis work when renting properties?
● What is the Positive Registry?
Let's get started!
What does it mean to have a bad credit rating?
Having a “bad credit rating”, as I said in the introduction, happens when a person buys a product or service but is unable to pay for it. As a result, their name is listed as negative/included in the lists of official credit protection agencies such as Serasa or SPC Brasil, for example.
In practice, this list contains the names of famous “bad payers”. But how is a name included on it?
When a company does not receive payment for its services, it can notify credit protection agencies about the outstanding debt. At this point, the consumer will be notified that his or her name will be added to the credit protection list if the debt is not paid within the specified period.
If the amount is not paid, your name will be blacklisted by all official bodies, and may be viewed and consulted by any company that has access to this data and wants to check someone's financial history. In fact, any company can refuse to sell its product to a person with a bad credit history.
This can happen when you fail to pay any bills, whether it's simply buying a product or even household expenses such as electricity, water and rent.
What does the law say?
Due to the economic crisis caused by the Coronavirus pandemic, in 2020, a new bill was created with the aim of helping people who are at risk of having their names blacklisted to avoid this situation.
Already approved by the Chamber of Deputies, Bill 675/20 prohibits the inclusion of bad names in Serasa and SPC for a period of three months, providing more time to pay debts and, consequently, reducing the economic impacts of this negativity.
What are the consequences of having a bad credit rating?
Having your name on the negative list gives a bad image to the market, indicating a person as a bad payer. According to a survey published by Estadão , in 2018 Brazil registered 63.4 million people with a negative name, a figure almost equivalent to the population of Italy.
In practice, the consequences of having your name on this list are numerous, such as:
● Having difficulty obtaining loans;
● Finding obstacles to obtaining any type of financing;
● Not being able to open a checking account or acquire a credit card;
● Blocking of assets such as real estate or vehicles.
Is it possible to rent a property with a bad credit rating?
Based on what we said above, many tenants may encounter several difficulties in renting a property if their name is blacklisted.
After all, real estate agencies can check your financial history with official bodies and refuse to close the lease on the property if the tenant has debts to pay. This happens because in practice, there may be a risk of delaying the payment of rent or other necessary debts.
Is it possible to rent a property with a bad credit rating?
Despite this, it is very common to see people looking for alternatives to be able to sign a rental agreement . For example, one of the most common options is to use a guarantor to help with the payment of the rent and all the amounts included in the contract, or even through surety insurance , as provided for in art. 37 of the Tenancy Law.
Although it is a highly sought-after alternative, it is important to emphasize that the best option will always be to seek to clear your name from the credit protection list by paying off the necessary debts. This way, you will not encounter any difficulties in making any purchases or loans.
We will understand more about this in the next topic.
How important is it to clear your name?
The importance of clearing your name from the credit protection list is simple: being able to make any type of purchase without restrictions and not being "badly regarded" by the market.
With a clean record, you will have no difficulty in taking out loans; managing your bank account and cards without any worries; being able to travel to other countries without running the risk of having your visa denied; and most importantly, being able to finance or rent any type of property.
To help you with this task, we have put together a step-by-step guide to follow in the following topics, with all the essential tips for clearing your name from the credit protection list.
To begin with, the first thing you need to do is find out if your name is on the blacklist. Keep reading to find out how!
How do I know if I have a bad credit rating?
The process to find out if you have a bad credit rating is very simple: just check your CPF on the official websites of the main credit protection agencies ( Serasa , Boa Vista SCPC and SPC Brasil ).
Each of them may contain information about different companies, meaning your CPF may be clean in one of them, but negative in another. Therefore, it is important to check all three to make sure that there is no debt to be paid.
If your name is in fact blacklisted, the best way to resolve the situation is to negotiate the amount with the reporting company.
Once the situation is regularized, the store or business has up to five business days to request that the agencies remove the consumer's name from the list of defaulters.
What if the consumer does not pay his debt?
In an interview with UOL , financial planner Myrian Lund states that the name can remain blacklisted for up to five years, after which it will no longer be registered on the list. However, companies can continue to collect the debt from the customer until the customer pays the amount due.
Having a bad credit history can cause serious financial problems and make it difficult to move money and purchase any products. In the real estate market, this can make it difficult or even impossible for a tenant to rent a property.
To avoid this situation, in addition to worrying about keeping your accounts up to date, companies responsible for managing the rental process and the day-to-day lives of tenants, such as Citas, carry out an in-depth search into the buyer's financial history: the so-called credit analysis.
Check out the next topic to understand more about how it works.
How does credit analysis work when renting properties?
Credit analysis is a process whose main objective is to assess a consumer's financial capacity. In other words, it analyzes each person's profile to check whether they have a good payment history and whether they have the conditions and capacity to make the necessary payments.
At the end of the assessment, each consumer will receive a score called a credit score, which will indicate their likelihood of paying their bills. In practice, the more outstanding debts a consumer has, the lower their score will be.
The score can range from 0 to 1000, and the closer to the maximum value, the better your image in the market. See the table used as a reference:
● 0 to 300: high risk of default
● 301 to 700: medium risk of default
● 701 to 1000: low risk of default
In the real estate industry, many companies check tenants' credit to check their financial history and to ensure that they will be able to keep up with their rent payments.
This process is important for both parties. For tenants, it serves as a way to demonstrate their image as a good payer, which can help them rent their dream property.
For the landlord, credit analysis is essential to prevent their property from being rented by a tenant with a negative history as a payer, consequently avoiding problems in paying the rent and other bills.
Citas Credit Analysis
Credit analysis is an essential process when renting properties, and we at Citas could not leave this aside.
In addition to being concerned with finding your dream apartment, our mission goes far beyond that. Our role is to monitor and take responsibility for the day-to-day lives of our citizens , from the signing of the rental contract to their daily lives during their stay.
To ensure this management and provide perfect housing, we carry out a credit analysis of all our tenants as a form of security for both parties.
Through our Big Data system, we conduct in-depth research on our tenants, analyzing not only their credit scores, but also other essential items for signing the rental contract.
In other words, if the person has any type of pending process, if the income is not in accordance with what was declared, if all personal documents are in order, and mainly, their credit regularization with Serasa and Boa Vista SP.
In the end, we can analyze whether the tenant will be able to cover all the rental costs, and help them choose their dream property from the list of our units in São Paulo .
Come and get to know our community and our units !
How to pass the credit analysis?
As we said above, credit analysis assesses several financial issues of people to check whether they are able to rent a property. In this process, the main points that must be in order to be approved are:
● Do not have a low rating or restrictions on your name: the first rule, and perhaps the most important, is to not have your name tarnished or a low score with credit protection agencies. This gives a negative image of the tenant and can make it difficult to obtain a property;
● Have a stable income history: in addition to the previous item, the tenant must have a stable income history, taking into account other daily expenses. This analysis is a great indicator of whether the tenant will be able to keep up with the rent payments;
● Complete documentation: finally, all of the tenant's documents (CPF, RG, etc.) must be in order for the rental agreement to be signed.
In addition, there is another widely used method in the market to check consumers' financial history, which works in addition to credit protection agencies: the positive registration. Let's understand how it works.
What is the positive registry?
The Positive Registry is another analysis tool widely used to check people's financial history. Created in 2011 by Law 12.414/2011 , this system allows companies where you will apply for credit to check your behavior as a payer.
In practice, it works as a kind of financial resume, with all the information about what the consumer has already paid and their outstanding debts, such as: payment of the credit card bill, bank financing, bills (water, electricity, etc.), bank account transactions, among others.
At the end of this analysis, the consumer will also receive a score from 0 to 1,000. Just like the credit score, the closer to the maximum value, the better your image as a good payer and, consequently, the lower the probability of defaulting.
Here, it is worth noting that a person who has a low score does not mean that they are a bad payer, but rather that they do not have large financial transactions registered in their name.
This is the great advantage of the positive registry in relation to Serasa, as it shows every time a person paid their bills and made a financial transaction, while the other system operates in a completely opposite way, focusing on recording the data of people who did not make any type of payment.
But how can my name be included in the Positive Registry?
In 2019, Law 12,414 had some of its rules changed by Complementary Law 166/2019 . The main change seen was the automatic adherence to the Positive Registry. This means that all individuals or legal entities that have loans, financing or any product purchases will have their names automatically included in the system.
All of this data can also be accessed free of charge on the platforms of the credit protection agencies I mentioned above. This way, the consumer will know exactly whether or not they have any outstanding debts, as well as their credit score at any time.
Conclusion
Having a bad credit history brings many financial problems to people, who end up encountering serious difficulties in matters such as applying for loans, making any type of purchase and even renting a property.
Therefore, it is important to look for the best ways to clear your name, and periodically check your credit score on the platforms of official bodies to monitor your financial history.
And remember: if you want to rent a property, Citas will provide all the necessary support throughout the process, including analyzing the tenant's credit to ensure security for both parties.
If you liked this text, share it on social media and continue your visit to our blog !
