The KHR Service is a credit information database operated by Hungarian banks and credit institutions. Banks use the KHR to share their customers’ credit data with one another. They do so to provide one another with information during the credit assessment process in order to facilitate access to loans by debtors with good credit histories, protect customers against the dangers of over-indebtedness, and in general to mitigate the risks involved in lending.
Credit institutions are required to operate the KHR under Act CXXII of 2011. The Act defines the aims of the KHR as follows:
“Data held in the Central Credit Information System are processed to enable more informed judgements on creditworthiness as well as to promote fulfilment of the requirements for responsible lending and the mitigation of credit risk with a view to ensuring the safety of debtors and reference data providers.”
Consequently, by supporting responsible lending, the KHR serves the interests of both customers (“debtors”) and credit institutions (“reference data providers”).
Parties to the Service
- Basically, the operations of the KHR involve the following three players:
- The KHR Service:The central KHR database is operated by BISZ Zrt., providing access in accordance with legal regulations.
- Banks and financial institutions: Institutions engaged in lending or the provision of loan-type products and services are authorised to use the KHR database to make queries and submit data. Such institutions include banks, savings cooperatives, leasing companies, companies specialising in the provision of personal loans, sales finance and housing loans, and other financial enterprises. Institutions such as the National Tax and Customs Administration (NAV), ministries (except Family Insolvency Service), municipalities, public utility and telecom providers and NGOs are not allowed to subscribe to the Service.
- Customers: Individuals and businesses whose customer and credit agreement data (as well as data on events of default and abuse as specified in the KHR Act) are submitted to the KHR by credit institutions.
- The KHR holds data on both consumers and business customers. Accordingly, the KHR consists of two parts, referred to as “subsystems”:
- the consumer subsystem holds data on individuals,
- the business subsystem holds data on businesses.
The KHR holds full records, i.e. it contains positive information (in respect of debtors whose repayments on their debts are in order) as well as negative data (in respect of debtors in default, or abuse).
Records in the consumer subsystem of the KHR cover the following data categories:
- Register of credit agreements
- Information on credit default
- Data on bank card fraud
- Register of loan applications rejected on grounds of fraud
Under applicable legislation, financial institutions are required to register the data of all credit agreements and agreements for similar financing schemes (leasing, securities lending, etc.) in the credit agreement records of the KHR consumer.
The customer may specify in a statement whether to allow banks to query their credit data on record as part of credit assessment. They may also specify whether the information should be deleted following closure of their account, or held in the KHR for another five years. As “good debtors” with verified positive credit histories are highly appreciated by banks, this prospect is valuable for every individual seeking to apply for a loan.
The option to make a statement does not apply to credit default, bank card abuse and fraud, as such information will be available to banks for credit assessment irrespective of any statement made by the customer.
Personal data on record
The consumer subsystem of the KHR maps all information to individual customers. This means that in respect of a credit agreement, default or abuse, records will include information on the agreement and abuse as well as personal data on the individual contracting party.
The KHR collects the following information on each individual:
- Birth name
- Place of birth
- Date of birth
- Mother’s birth name
- Current name
- ID card number
- Passport number
- Driver’s licence number
- Number and type of other identification document
- Home address
- Mailing address
- E-mail address
- Role in the credit agreement on record (debtor, co-debtor)
The information on record will remain in the KHR as long as the records contain any credit agreement, default or abuse linked to the customer. Subsequently, the information will be deleted irretrievably.
How do credit institutions use the information obtained from the KHR?
Users of the KHR may access the information held in the KHR only in the manner and for the purposes specified in the KHR Act.
When a credit institution is contacted with a loan application or financing need, it will consider the applicant’s creditworthiness as part of the credit assessment. As part of the assessment, a bank will request the customer to submit a wide range of information and will also gather additional information from a variety of sources in order to have the best possible understanding of the customer’s repayment capacity. For banks, the KHR records are one such key source of information.
The KHR consumer is capable of recording both positive credit histories and negative information (events of default, abuse and fraud). Using the KHR, banks can assess the creditworthiness of their customers more accurately, which allows them to make better offers and, in the spirit of responsible lending, avoid lending to insolvent or over-indebted customers. This serves the long-term interests of customers as well. The KHR Service has benefits for both customers applying for loans and the credit institutions extending the loans.