Why can banks ever report the reasons for loans?

A negative decision on the application for a loan is often not accompanied by an explanation of the bank. Lenders have the right to not give explanations to their actions, which leaves the borrower in ignorance.

If the banks had given an exhaustive response about the reasons for refusal, borrowers could correct the situation on the basis of the weaknesses of their loan portfolio.

For a long time, the banks have been used in banks a borrower solvency assessment systems. So-called scoring systems analyze the loan portfolio of the borrower, that is, all the information on the state of its credit history, income, other factors.

Such systems have different evaluation criteria and are unique. Therefore, having received a refusal of one bank, you can get approval in the other. At the same time, banks do not disclose the secret of the system, so that this information does not become a tool for fraudulent actions.

Experts believe that the creation of a unified model of scoring system would contribute to the fact that refusals could contain more discrepanied information for the Bank’s customers.

Before visiting the bank, you can independently evaluate your financial situation in the following criteria:

In October last year, the Government of the Russian Federation tried to oblige banks to reveal the reason for refusal on a loan application, motivating this by the fact that borrowers could correct their weaknesses. To which the lenders acutely expressed their attitude to this offer.

Banks believe that knowledge of the reasons for refusal will not affect the borrower, and for the bank it implies the disclosure of secret information. As we said earlier, each model of scoring calculation is unique, so the dissemination of information about the mechanism of its work is impossible.

Accordingly, the publicity of the reasons may cause the clients to adapt to scoring models. But it will have negative consequences. Hoping for the approval of the loan, the borrower will eventually receive a refusal, since its data does not coincide with reality, which in turn is reflected in credit history.

Not all finance experts agree with the banking position. They more share the practice of other countries where legislation obliges creditors to give a detailed response to failure in the loan application.

Also, experts believe that such evaluation criteria as the floor and marital status should not be taken into account by the scoring system and are illegal. Thus, consumer rights are violated — borrowers.