Credit bureaus are data collection agencies that gather credit related information with regard to individuals and businesses. Business data typically includes credit worthiness, collection, leasing and repayment capability and other financial information collected from various sources. A company’s day-to-day happenings, financial position, payment capability, collection capability are tracked over different intervals and recorded by the credit bureau to provide real-time accurate information.
Similarly, with regard to individuals, their borrowing patterns and bill payment information is collected. All this data is used to predict future behavior. Adequate credit information facilitates lenders to screen and monitor borrowers’ credit worthiness.
For example, when a business or consumer approaches a financial institution for credits, i.e. loans, lease, rentals, hiring or any kind of financial support, the institution evaluates the application by submitting the request to a credit bureau. The bureau evaluates the request using a scoring methodology. The score value is determined based on a set of predefined factors containing different objectives. These factor values change when the objective changes. The objective, in turn, is determined by various factors. Financial institutions rely to a large extent on this score when determining the credit health of a business or an individual.
Process for integrating credit bureau data services in an application
For an application to be integrated with credit bureau data services, the application must, first of all, be configured with the required set-up to simulate the credit bureau’s data services in the application. As the first step, the company must have an agreement in place, with the concerned credit bureau to access their data. The credit bureau will provide detailed specifications and functional documentation on how requests can be integrated and accessed in an application. To share bureau details, the bureau will provide access by means of a separate log-in which can be used to submit credit requests and receive credit data.
On successful implementation of the credit bureau data services request in the application, the testing team will create a test environment by procuring setup details consisting of URL, IP and port number, test login details, and individual details required to connect with bureaus to submit and receive data. Basic Financial Accounts knowledge will be a plus point in testing credit bureau data services.
Steps in testing
- Smoke testing is performed to check whether the bureau services are available and proxy settings are configured to submit the request and receive the data from the credit bureau.
- Functional testing is done by submitting the request to the credit bureau. The request contains a list of prerequisite parameters used to submit bureau data (bureau name, bureau request, bureau login details, and set of test cases or individual test cases).
- Once the information is found to be accurate, the request is converted into machine readable format or XML file format and the request is encrypted and submitted to the credit bureau in a machine readable format.
- The request is decrypted at credit bureau and requested data is evaluated for identity verification and once the information is found to be correct, the requested bureau data is appended, encrypted and sent back to the request channel. In case the request is found to be invalid, credit bureau will send the request appended with ‘failed’ status.
- The data received from credit bureau is decrypted and each subset of information is parsed and stored in the application that is designed to store the bureau data. The bureau data is simulated and presented as reports and this data is further populated into individual pages that are designed in the application to present the data received from the credit bureau. The parsed data is further evaluated to ensure that correct information is received for the submitted request type. On receiving failed status from the bureau, the data is not parsed and bureau request status is displayed as failure.
- Received bureau data is further utilized and scorecards that consist of individual factors and scores are evaluated. Finally, the credit eligibility of the company or individual is decided for credit approval. Another final scrutiny or evaluation is done to ensure that the correct data is used for factors and score evaluation.
- Further, payment information is captured to check the payback capability of the company or individuals. This payment information consists of timely payment, delayed payment or defaulted payments if any. Similarly, for leasing of goods, payment information tracks invoice collection, returns and renewals of goods and lease, etc. Schedulers are created and triggered to simulate the collection period with the end result of the evaluated invoices, captured and stored in the application.
- Request that are outside the purview, attract fees from the credit bureau, and payment are made against invoices raised by the bureau.
- As credit request is considered as a sophisticated operation, careful evaluation is required to identify flaws and defects in the application implementation, that identified defects are reported and to ensure that the final application does not have any defects.
The higher a credit score value, better the chances of a credit request approval. Lower credit score is considered as ‘high risk individual’ and further evaluation takes place to consider other parameters Chances of credit approval is less for such requests. The end result is either approval or rejection of credit request by the financial institutions.
The timely payment, timely collection of invoices, renewals of leases are considered as plus points and may elevate the score value.
Default payments, delay in collection and renewals of leases are considered as negative points and can affect the score value negatively.
A country’s rating is also decided by the consideration of a set of factors evaluated by credit bureaus. While evaluating a country’s rating, sophisticated information is considered and carefully evaluated and rated. Partial list of credit bureau data service providers are Dun & Bradstreet, Equifax, Experian, TransUnion, Reuters, Moody’s, Graydon Gateway, ABR etc.
In India the credit bureau data service functions under the name CIBIL (Credit Information Bureau India Limited). This bureau provides individuals credit and risk information pertaining to loans and credit cards. Different sets of basic parameters are considered to evaluate credit bureau data request in different locations, namely: SSN, Country ID, Tax ID, PAN Number (In India).