Credit rating of a customer of 

BIDV (business customer)

Step 5: Determine the scale

Step 6: Rating Committee Meeting

Credit rating result

With a total score of 75.6

The company ranks in the BB+ position

Step 7: Communication of Decision

This indicates that the customer is fully able to repay all debts

The loan is accepted

Step 8: Dissemination of the Public

Step 9: Monitoring for Possible Change

THE RATIONALITY OF CREDIT RATING

The Asian Development Bank (ADB) has pointed out that Vietnam's bond market is growing at a much
faster rate than other countries in the region

Corporate bond growth reached an all-time high, around 70%

Mainly focused on maturities of less than 10 years

To support the sustainable development of the market, contribute to protecting the interests of
investors as well as helping businesses have appropriate capital strategies, the development of credit
rating services is one of the indispensable factors

The S&P representative has affirmed that the bond market is important, so the development of
independent credit rating agencies is a must, and also that,  promoting the sustainable development of
the bond market in particular and the capital market in general

In addition, S&P also shared a methodology for ranking non-financial companies and analyzed how to
calculate ratings for a specific example

Having a good credit rating makes a company's stock price better

There are many opinions that Credit Rating is similar to analyzing stocks, can give buy or sell
recommendations, estimate expected return, and can serve as a basis for making investment decision
tips

Credit rating, by assessing the overall financial health of a business and forecasting its ability to repay
debt and interest in the future, is a reference channel to help investors gain more perspective before
making a decision. investment decision
Banks will provide CIC with information about the loan, the borrower's name, and the loan payment
process. CIC will then aggregate them into a unified database that reflects the credit history of each
individual/business.

Then, when issuing a credit to a certain person, the bank will access the CIC system and check their
information before making a final decision.

I. Increases goodwill
Creating confidence and trust in the minds of the investors, shareholders, customers,
suppliers about the image of the company.
II. Healthy credit score
A high credit score paves the way for quicker loan approvals from the financial institutions
at low-interest rates.
III. Helps in growth and expansion
High credit rating helps the company in getting the loans from the banks quickly because of
the high credit score which helps the company to utilize that amount in expansion and
diversification and modernization.
IV. Ensures liquidity
In the market, a company with a good credit rating ensures liquidity for various credit
instruments and mobilization of the funds

The major advantage of a good credit rating is that it eases financial transactions and keeps
low-cost credit available.
This is also a big help when searching for a job or obtaining security clearances for well-
paying, high-status work. With a sound credit background, you're also more likely to get
loans and insurance at preferred rates with faster approval
To get the most effective credit rating?
Firstly, businesses need to have a business plan that is regularly monitored and updated
Secondly, the proactive coordination from the Board of Directors and Executives plays a very
important role in the process of working with the Credit Rating agency and periodically
updating changes in business activities and corporate governance.
The information businesses provide to the credit rating agency needs to be honest and
transparent, ensuring the accuracy of the rating results
THE ISSUES WITH CREDIT RATING
Internal Rating
Each customer can have a credit relationship with many banks at the same time, so the
internal rating system of banks is based only on the customer's credit information with their
own bank
Moreover, each bank has its own, inconsistent scoring scales, so it is difficult to compare
and evaluate customer credit levels objectively and accurately
The problems with the agencies themselves
With the CIC
Since the ability to repay the loan is the most important factor that the lenders care about,
the indicators that predict the ability to repay in the future such as the stability of income or
the average monthly income or years… should be considered for testing in the model.
In fact, these are commonly used criteria in credit ratings of natural persons (Abdou &
Pointon-2011) and are the information that credit institutions usually collect when
approving a loan, so CIC will be able to collect this data for credit rating.
The criteria used for testing in CIC's credit rating model for individuals are only based on
history without any predictive criteria for the future
Langohr & Langohr (2008) has pointed out that while the short-term credit risk assessment
focuses on the assessment of liquidity, long-term credit risk, in addition to liquidity, must
also consider the ability to recover capital if credit risk occurs in reality.
Although CIC's credit rating process is quite strict, customer information is controlled many
times, ensuring prudence and objectivity, limiting the impact of the processor.
Input data information for CIC's scoring system is obtained from many sources, mainly
information on the outstanding balance, information on assets, and information on
customer identification.
CIC is also taking advantage of the information available for credit rating.
To the customers
Like the common adage that the rich grow richer as the poor grow poorer
Just when you've lost employment and fallen behind with bills, or have a medical
emergency, the rating drops and you face a hard time paying for things in times of need
A low rating also creates difficulties in getting a loan at a reasonable interest rate.
To make things more difficult, credit ratings are now used to weed out job candidates,
leaving those who need employment the most with fewer quality-paying options than
others
Credit ratings can also create a false picture of a consumer's personality, painting a more
rosy picture on paper than their true character.