Risk appetite check using credit scores, by Telcos

Your credit score and credit information are your reputational collateral which reflects your credit behaviour and provides an indication of your debt management capacity. Postpaid telephone connection is an alternative form of credit. Which means, through a postpaid connection, the telecom service provider gives us an advance credit facility and trusts us to make the bill payment of our usage, by the due date.

In some countries, telecom service providers are using credit scores and credit information for making instant decisions on postpaid telephone service applications to grant on spot telephone connections to consumers. When you apply for a postpaid telephone facility, the service provider will pull your credit score and credit history which gives the information provided by you in the application. Your score will enable the service provider to assess your financial standing and project your likelihood of paying the postpaid telephone bills regularly. Once the telecom service provider runs know your customer (KYC) check on your documents and is satisfied on your payment capacity, they will be able to grant you the postpaid telephone service instantly.

          

Credit score is also being used by telephone service companies to evaluate the “risk appetite” of the consumer and assign “credit limit” as per the credit behaviour of the consumer. Value added services may also be offered to consumers based on their credit score.

In developed economies, an individual’s credit information report and credit score are very critical reputational collateral and is being used for multiple purposes by various institutions. Employers review it before recruiting a new employee; landlords require it before renting out an accommodation and of course telecom service providers check an applicant’s credit history before providing a postpaid phone connection. In the future, a person’s credit information report and credit score will be imperative for a lot many things in addition to availing institutionalised credit facilities.

Therefore, it is important to maintain financial discipline and prudently manage all your financial obligations in order to build and maintain this vital reputational collateral that will become critical for a lot of transactions in the future. Review your credit history and credit score frequently to start developing this reputation collateral.
Source: Secondary