Chapter 5

CREDIT INVESTIGATION PROCEDURE AND REPORTS

The following are some useful reminders to the credit nvestigator during the

process of investigation and in the makıng of the report

I. In the field of Investigation

1. Make it a habit before going out to the field of investigation, to check internal records
thoroughly for any information on the subject of the investigation. Check credit files, court
cases records, current accounts records, signature control records, central liability files, etc.
Check with the ""Credit Index" at the office of the Association of Bank Credit Investigators for
possible pertinent credit and personal references

2. During the process of investigation, asking for references from banks, commercial firms and
from individuals who happened to have come across the name's of the subject of investigation
would be a good source for possible leads to pertinent information and needed facts about the
subjects of investigation.

The above procedure, at the initial stage of the investigation, will be a big help to the
investigator, if properly accomplished. An investigator who feels reluctant and to lazy to look
for possible leads in their own files, or even careless in performing such an important
procedure, would find himself missing a vital lead to an information that would make the result
of his investigation fruitful and reliable. The investigator will realize at the last stage of his
investigation, that he would have obtained such an important information right at the early
phase of his investigation, if only he was too willing to perform properly what he was taught to
accomplish at the start. An investigator who is too shy to ask for references during the process
of investigation will find difficulty in performing his job well. Asking for references from logical
sources will make the work easier, strenuous work on the part of the investigator will be
lessened and oftentimes eliminated and therefore factual results are obtained in the least
possible time. In this connection, building up a strong and pleasant relationship with credit
investigators and credit men of other banks and commercial firms, would be a good asset for a
man to have.

3. lf any derogatory information is received, follow it through immediately and thoroughly. Get
confirmation or denial of the report as much as possible.

4. In the process of investigation, your analytical should not only be focused on fundamental
matters about the subject, endeavor to be more concerned about it, in establishing factual
results through a rigid scrutiny of events as the information are gathered.

5. Reporting bank or company's in credit dealings with the subject of the inquiry, do not be
content with the standard statement " Experience satisfactory." As much as possible, endeavor
to obtain a more meaningful insight in to the credit worthiness of the subject of the inquiry.
This can be done by asking pertinent questions on the credit relationship.

6. When conducting credit checking on insurance company, aside from the routine credit
investigation procedures, check the credit standing and financial stability of the insurance
company with the office of the Insurance Commissioner and check also with three or four local
insurance companies with whom the said insurance company maintains reinsurance treaty
agreement relationship. Consult the list of insurance companies who are blacklisted by the
office of the sheriff of the cities and the Department t Justice of the Philippines. The Credit
Investigation Report on insurance companies may be supplemented with a condensed audited
financial statement of the insurance company, as examined by the Office of the Insurance
Commissioner. In this connection, the following should be obtained: Total Assets, Total Ledger
Assets, Total Admitted Assets, Total Liabilities, Net Worth, Gross Income and Net Income for
the Period.

7. In getting financial statements of individual or commercial firms other than insurance

companies from outside sources, the following should be obtained: Total Current Assets, Total
Assets, Total Liabilities, Net Worth, Gross Income or Gross Income in Sales and Net profit.
8. Checking conducted in reply to a capable inquiry: Obtain a statement from the current
banker/s or credit companies, whether a credit relationship may be recommended by them and
under what terms, such as credit limit, terms, security, etc.

9. In case of re-checks, the investigation requires greater attention to details. Obtain

explanation on Reduction of Line, Cancellation of Line, Increase in Line, Increase in Collateral
Value, Decrease in Collateral Value and Added Guarantors.

10. Any change in previous terms of relationship should satisfactorily explained. The
investigator's inquiring mind and respect for details will be evident by his handling of these
matters. For this reason, only one more skilled investigators are assigned.

II. Preparation of Report

1. In preparing the Credit Investigation Report and other investigation reports, indicate the
name of or quote the person from whom the information was obtained. Use quotation
marks in narrating the information gathered.

2. Information gathered from banks and in trade should be arranged in the following
order:

a. Banks who reported current dealings should be reported ahead of those banks who
reported past dealings, followed by those banks who reported no dealings.

b. Commercial firms in trade who reported current dealings should be reported ahead of
those who reported past dealings, followed by those who reported no dealings.

In this manner of reporting, the reader will be acquainted about the current credit
responsibilities of the subject of the inquiry at the start, and as he goes on reading,
minor and other small details of the report will be taken as the report ends.

3. In conducting credit checking on a business firm together with the name/s of the firm’s
principal/s, prepare a combined credit investigation report on the firm and principal/s.
The credit investigation report should be prepared in a manner that information about
 the firm should be reported ahead of these information about the principal/s in the
order indicated in No. 2 above.

4. Every report should indicate, by way of a footnote, all relationship, if any, the subject of
inquiry has with this bank; the origin and the basis investigation conducted; and, in the
case of other reports with a different nature of investigation, such reports should
indicate likewise, footnote disclosing pertinent data.

5. In reporting, use credit language for proper tone. Avoid high sounding English; it has no
place in Credit Report. Be brief but complete.

6. Bear in mind always: Your credit report is an important basis of a credit decision, either
here or abroad.