When Borrowing from Banks with CB Grade 1, Downgraded to Grade 5... 1 in 10 Faces 'Blind Evaluation'

Top-tier borrowers face 72 cases of high interest rates over 7% annually... Some cases apply 13% per year
Assemblyman Song Eon-seok: "Financial companies must provide credit evaluation criteria and grades to customers"

[Asia Economy Reporter Kwangho Lee] It has been confirmed that one out of ten individuals rated as credit grade 1 by credit rating agencies was downgraded to below grade 5 when applying for bank loans.

On the 1st, independent lawmaker Song Eon-seok analyzed the credit loan and limit loan (overdraft account) cases from six banks?KB Kookmin, Shinhan, Hana, Woori, K Bank, and Kakao Bank?submitted by the Financial Supervisory Service, revealing these findings. The investigation period was from July to December of last year.

The number of cases where borrowers with a CB (Credit Bureau) grade 1 were classified as low to medium credit borrowers with bank grades of 5 or below totaled 42,934 cases (?1,223,428,000,000). This accounts for 9.7% of all CB grade 1 borrowers' credit loans (444,710 cases, ?19,732,647,000,000) and 6.2% by loan amount.

Notably, there were 72 cases where CB grade 1 borrowers received loans at high interest rates of 7% or more annually. Some cases even applied a maximum annual interest rate of 13%.

According to the Bankers Association, as of the end of last year, bank credit grades 1?2 corresponded to an average CB grade of 1.7. Grades 3?4 corresponded to CB grade 2.3, and grades 5?6 corresponded to CB grade 3.4. This means bank credit grades are generally set 1?2 grades lower than CB grades. Even applying this standard, the gap exceeding 5 grades is considered excessive.

The CB assigns credit evaluation scores based on 'repayment history information,' which includes delinquency status and past debt repayment records, while also considering the number of credit product uses, debt levels, and credit transaction periods. Each bank adjusts scores based on borrower characteristics and lending strategies to internally evaluate customer credit. Banks argue that differentiation in credit evaluation models is a competitive advantage, making such discrepancies inevitable.

However, financial consumers typically gauge their credit level based on CB standards, and they have no basis to understand why such large credit rating gaps occur between banks.

Lawmaker Song stated, "It is difficult to accept that individuals rated as credit grade 1 by credit rating agencies receive grade 5 evaluations from banks and bear expensive interest rates when applying for loans." He added, "Financial companies should provide customers with credit evaluation criteria and grades to resolve confusion caused by information asymmetry and guarantee the basic rights of financial consumers."

This content was produced with the assistance of AI translation services.