CREDIT PRACTICES AND

PROCEDURES:
CREDIT APPLICATION,
CREDIT INTERVIEW CREDIT
INVESTIGATION INSPECTION
AND APPRAISAL

Credit and Collection: Midterm Lesson 4

OUR TEAM

Bobadilla, Jan Kyla Buenavente, Renz Bueza, Aron Rafael

Coralde M.Jay Gallarte, Chen Chen Pereda, Jennylyn

INTRODUCTION
Credit practices and procedures consist of steps
and methods relating to credit evaluation and
analysis. The credit analysis process refers to the
evaluation of a borrower's loan application to
determine the financial health and managerial
strength of an entity.
CREDIT
APPLICATION
A credit application is a form used by potential
borrowers to get approval for credit from lenders.
The information on the application is used to
determine the borrower's credit history,
business/employment status, and ability to repay
the loan amount.
PURPOSE OF CREDI T
APPLICATION
• To understand the nature of the customer's business dealings and sources of income

• To assist the credit analyst to make a credit decision and in the periodic review of credit
relationship, and provide support to counsel as needed

• To allow the creditor to obtain information necessary to make decisions about a customer's
ability and willingness to meet obligations within credit terms

• To serve as an investigative tool in fact-finding and fact- verification endeavors

• To serve as a contract that specifies the rights and obligations of both the applicant and
creditor Information to be included on the credit application
CREDIT
INTERVIEW
The next step in the credit evaluation
process is credit interview. A credit
interview validates the information
stated in the credit application.
PURPOSE OF CREDI T
INTERVIEW
• To determine the qualification of the credit applicant

• To find out if the credit applicant is mature enough to handle the responsibility

• To validate the identity and status of the applicant

• To determine the credit experience of the applicant

• To find out if his/her financial condition will permit making payments after
considering all the factors
CREDIT
INFORMATION
Credit Review
Qualities of Credit Information
Credit Information Act
Credit Information Corporation
CREDIT REVIEW
Credit review is based on the
information of the credit applicant.
The assessment of an applicant’s
credit standing is based on different
sources and types of information.
 KEY INFORMATION R E QUI R E D
BY CREDIT COMPANI E S
01 02 03 04 05 06

Financial Transaction Income or Personal

Credit history Reputation
condition (assets records with employment details (age,
and liabilities suppliers, banks, status residence,
and institutions marital status)
SOURCES OF CREDIT INFORMATION
Internal source such as credit record and customer
supplied information
External sources which include trade references, banks,
newspaper clippings, court cases, reports from
competitors, credit reporting agencies

QUALITIES OF CREDIT INFORMATION

Updated customer data
Complete and consistent documents
Accurate and genuine documents
Credible external sources
CREDIT INFORMATION SYSTEM ACT
(CISA)
Republic Act No. 9510, otherwise known as, Credit
Information System Act of 2008 or CISA Law is an act
establishing the credit information system in the
Philippines. The State distinguished the need to build a
centralized and comprehensive credit information
system for the dissemination and collection of fair and
accurate information relevant to, or arising from,
credit and credit-related activities of all entities
participating in the financial system.
CREDIT INFORMATION SYSTEM ACT
(CISA)

The Credit Information Corporation (CIC) is a

government-owned and controlled corporation that is
envisioned to be the leading provider of independent,
reliable and accurate credit information in the
Philippines. CIC was created in 2008 by virtue of
Republic Act. No. 9510, otherwise known as the Credit
Information System Act (CISA). To collect, collate and
disseminate credit information.
CREDIT
INVESTIGATION
a procedure undertaken by a
financial institution to examine a
potential client's ability to pay
back a loan.
 PURPOSE OF CREDI T
INVESTIGATION

To validate To gather To collect

factual and
the credit additional
accurate
information relevant
information
supplied by data that will lead to
the applicant an appropriate
credit decision
 SCOPE OF CREDIT
INVESTIGATION
01 02 03 04 05

Company’s Financial Dealing with Banks Court Cases

Background/ Conditions Government Experience
history Lending with the
Agencies, Subject
etc.
FACTORS IN DETERMINING
THE SCOPE OF CREDIT
INVESTIGATION
Client Classification
3.
years in business

1. 4.
team members
Purposes Amount
and Types of Involved
Investigation

2. Company Credit Policy Time and resource

constraints 5.
TYPES OF CREDIT
INVESTIGATION
1. DIRECT INVESTIGATION
— occurs when the creditor collects credit information either through
direct contact with the customer or through direct contact with
noncommercial sources of information such as competitors, banks and
other trade references that may have relevant details to share.

2. INDIRECT INVESTIGATION
— usually refers to acquiring information from third-party sources that
are in the business of preparing information on businesses/companies.
These third-party sources are referred to as commercial credit
agencies, bureaus or “repositories.”
DUTIES AND RESPONSIBILITIES
OF CREDIT INVESTIGATOR
1. Compile and analyze credit information gathered by investigation.
2. Obtain information about potential creditors from banks, credit
bureaus, and other credit services.
3. Interview credit applicants by telephone or in person in order to
obtain personal and financial data needed to complete credit report.
4. Prepare reports of findings and recommedations.
5. Contact former employers and other acquaintances to verify
applicants' references, employment, health history, and social
behavior.
6. Examine city directories and public records in order to verify
residence property ownership, bankruptcies, liens, arrest record, or
unpaid taxes of applicants
 QUALITIES AND QUALIFICATIONS OF
CREDIT INVESTIGATORS
1.EDUCATION 5. CONFIDENTIALITY
Bachelor’s degree in Finance, Accounting, Must be discreet with their clients’ private
Business Administration, or a related field. credit information.

6. TIME MANAGEMENT SKILLS

2. COMPUTER SKILLS The ability to meet deadlines and manage relationship
manager and client expectations.

3. COMMUNICATION SKILLS 7. COLLABORATION SKILLS

The ability to communicate effectively both orally and
Must be able to work in a team-oriented
in writing, and must be able to communicate with
diverse groups and populations. environment

4. ORGANIZATION SKILLS 8. INTERPERSONAL SKILLS

The ability to effectively prioritize tasks Skills for relationship building and
and manage multiple assignments. establishing rapport
INSPECTION
&
APPRAISAL
INSPECTION
Inspection is the evaluation of
the physical condition of a
building, equipment, machinery
or any property used as loan
collateral.
PROPERTY
APPRAISAL
Property appraisal is a valuation
of property, such as real estate, a
business, equipment or
machinery, by the estimate of an
authorized person.
APPRAISAL DETERMINES
THE VALUE OF THE
PROPERTY IN TERMS OF:
GOING CONCERN
VALUE 3.
years in business

1. 4.
team members

MARKET LIQUIDATIN
VALUE VALUE/PRICE

2. INSURABLE
VALUE
ASSESSED
VALUE 5.
 3.
To evaluate the market
value of a property in
FUNCTION OF APPRAISAL: eminent domain
proceedings
years in business

1. 4.
team members
To facilitate the To estimate
transfer of ownership assessed
of real property value

2. 5.
To assist the underwriter in To assess liquidation
establishing a value of value for forced-sale
security for a mortgage or auction
loan proceedings
THANK
YOU!
HAPPY FIESTA!!!