Despite the ubiquity of ads for credit cards, the Philippines has one of the lowest credit card penetration rates in Asia and the Pacific.
According to the World Bank Global Findex database, a paltry 1.9% of Filipinos aged 15 and older had a credit card in 2017 – down from 3.2% in 2014 and well below the 21.6% average in Asia and the Pacific, which encompasses 17 countries in East and Southeast Asia.
Reasons for low penetration rate
Poor financial literacy is generally presumed to be the main reason for low credit card penetration in the Philippines, but a 2018 MoneyMax survey with 2,238 respondents tells a different story:
Cebu Bankers Club President and Maybank Cebu Senior Manager Neil Darwin Credo believes that the latter is one of the biggest reasons for the low penetration rate in the Philippines.
He says strict bank requirements and low credit card approval rates keep credit card usage among Filipinos to a minimum. Stringent income requirements also mean that only affluent Filipinos from the middle and upper classes are able to qualify for the approval process.
If you’ve been trying to get approved for a credit card in the Philippines, there’s very little you can do about high interest rates or the approval process.
But there is one thing you have control over – your credit report.
How to build your credit report
Banks rely on credit history to determine whether or not you can make timely payments on your card. Your credit history is a record of how you’ve used your credit card in the past, showing your ability to settle debts on time.
Unlike the United States, there’s no centralized system and standard scoring for credit reports in the Philippines. Because of this, major Philippine banks use an internal database, which contains records of previous and existing clients’ management of their lending and savings accounts, to determine eligibility.
They also rely on external sources like the Credit Information Corporation (CIC), TransUnion, Bankers Association of the Philippines Credit Bureau, and Consolidated Cancelled Credit Cards (CCAP C4) negative file.
External sources like TransUnion provide information such as:
Once the bank is satisfied with your credit history and the results of their background check, they will approve your credit card application.
To strengthen your credit report, you must:
Credit Card Association of the Philippines (CCAP) Executive Director and Spokesperson Alex Ilagan says that overdue accounts not exceeding 30 days indicates that late payment was unintentional, so your credit history will stay clean.