Impacts and benefits of the Positive Register on the business of micro, small and medium-sized enterprises

A characteristic of credit markets is the difference in information levels between borrowers and suppliers of resources. This asymmetry can be greater or lesser, depending on how developed the market is. The greater the asymmetry, the more challenging the credit discipline, generating false positives and false negatives in the analysis and causing damage to the parties.

In Brazil, the consolidation of the Positive Registry was another step in the development of the credit market. This instrument incorporates a dimension aligned with the borrower's behavior in relation to the credit commitments made. The data on credit behavior from the Positive Registry provides a multi-sectoral assessment of credit, including financial institutions, telecommunications, utilities and the like, bringing greater hygiene to the assessment of credit. By covering data beyond financial institutions, information from the Positive Registry facilitates the inclusion in the credit market of a significant contingent of individuals and micro, small and medium-sized companies, especially those who are invisible to credit or have difficulty proving their income.

But what is the Cadastro Positivo and how does it work?

The Cadastro Positivo is a database that gathers financial information on individuals and companies (loans and financing, overdrafts, credit cards and consortiums) and data on relationships with utilities (telephone, TV and internet, water, energy and gas), including a history of payments made, outstanding or paid late. This information allows the credit assessment to take into account default and punctuality in paying for services and credit taken out - and not just default information. The information in the Positive Registry is summarized in an individual credit score, which is made available to banks, financial institutions, businesses and service providers.

Direct and indirect benefits for micro, small and medium-sized enterprises

With the Positive Registry, companies win on both sides: as a credit borrower, they know that their history will be taken into account when they apply for credit, and they can qualify for fairer interest and payment conditions. And as a lender, when it comes to assessing a potential client's credit, it will have reliable data with which to make a decision. In any case, the Positive Registry makes it easier for lenders to analyze and grant credit, and easier for companies to sell to their customers, who will be able to receive precise answers about the credit they have requested. The main benefits for micro, small and medium-sized companies are listed below:

• More quality in credit assessment, better knowledge of the customer, fewer defaults: granting credit with quality information can result in more qualified sales, with lower risk levels.
• Greater financial inclusion: with the Positive Registry, many companies previously excluded from this market now have the opportunity to show their payment history with various sectors and contract operations under fairer terms and conditions.
• Empowering borrowers: with their credit score, consumers and companies have a better chance of evaluating and taking advantage of the best conditions offered by the various credit agents operating in the market. In addition, the credit score is a source for the company to assess the financial health of its business and check for any debts.
• Democratization of information: individuals and companies interested in establishing a commercial/credit relationship with the CPF/CNPJ to be consulted can have access to the Cadastro Positivo. Individuals can consult their own credit rating free of charge, unlimitedly and via computer or cell phone on the credit bureaus' websites.
• Empowering MSEs: smaller companies have access to the credit rating of the borrowers with whom they intend to do business. For small companies, the credit rating is an important indicator and easy to access.
• Reducing over-indebtedness: a more accurate assessment of the borrower provides fairer and more balanced conditions.

Benefits for institutions and companies that grant credit

• Transparency and better risk pricing: the Cadastro Positivo database is made available to all institutions that carry out credit analysis in addition to the client's bank. This allows financial institutions to have more information about a prospect, even without a prior business relationship. This is a factor in expanding the market and the possibility of fairer interest rates, agreed according to the client's profile.
• Reduced default: more accurate data on the applicant's historical behavior can result in fairer assessments for consumers and more effective ones for institutions and companies that grant credit. Loans that are good for both parties tend to be repaid as planned, reducing defaults and reducing over-indebtedness.
• Customer knowledge and loyalty: good business results in satisfied customers and suppliers. They also increase trust between the parties and encourage new business. The more a company knows about its client's profile and financial capacity, the lower the risk rate and the stronger the business.

What is a credit note?

The credit score is a score calculated by credit bureaus, measured on a scale of 0 to 1000. It takes into account consumption habits and is linked to the CPF or CNPJ. Each bureau has its own methodology for calculating the credit score, but it is always individual and can be obtained directly from the websites. A credit score between 700 and 799 is considered good. Between 800 and 1000, excellent. When the credit score is low, it indicates a greater chance of default. That's why it's essential to do everything possible to keep it at a high level and thus increase the chances of having a credit application approved more quickly.

How to increase your credit rating?

1) Signing service contracts in your CPF or CNPJ: water, energy, gas and telephone bills in your own name or company name help to increase your credit score. Building up a credit history, as the company contracts credit operations, also contributes to increasing the score, as long as there is punctuality.

2) Paying on time: it is not advisable to pay your card bill late or to pay only the minimum amount. This will lower your credit rating. Try to pay the entire bill on the due date and don't abuse the overdraft limit. Late payment of consortium fees and renegotiated credit installments also affect your score.

3) Updated registration information: it is advisable to inform companies and institutions with which you have a credit relationship of any changes to your registration details. Spontaneous data updates, such as a change of address, telephone number or income bracket, are well perceived by the market and help to raise your credit rating.

4) Negative? When you find out that your CPF or CNPJ is on a restriction list, you should make a financial plan to renegotiate the debt and settle it with the company with which you are in default. Only then will the CPF or CNPJ be removed from the negative register, resulting in an increase in the credit rating.

5) Staying on the Positive Registry: the benefits of staying on the Positive Registry database with up-to-date information are indisputable, since it is on this database that information is gathered on the historical payment behavior that will be used to calculate the credit score. Keeping it indicates that there is no intention to “hide the payment schedule”. On the contrary, it is a strong indication of transparency.