Israelis Overdraw but Tend to Be Good Credit Risks, Database Shows

CofaceBdi figures show vast majority have an ‘excellent’ or ‘very good’ rating

Israelis draw money from an ATM in Beit Shemesh, December 12, 2016.
Gil Cohen Magen

Israelis may routinely overdraw their bank accounts, but are still seen as good credit risks, data from the country’s new credit database show.

CofaceBdi, one of two credit rating agencies authorized to access, process and analyze the Bank of Israel database, show that 36.2% of Israelis have “excellent” or “very good” credit scores and another 39.6% have “good” scores. Only 8.6% have a “very low” score with the rest rated as “reasonable” or “low.”

CofaceBdi said the average score on its scale of 300 to 850 is 687, based on the international FICO model, with the median score within a range of 700-719. That put it at about the same level as for Americans, which is 709, a figure that has been steadily rising since the 2008 financial crisis.

“Our analysis shows that the Israeli population is financially strong,” said Eyal Yanai, co-CEO of CofaceBdi, which he attributed to the Israeli lending industry’s disciplined practices. “The market was barely effect by the 2008 financial crisis because lending is done is a cautious and orderly way.”

Israel’s first ever credit database went into operation in April in an effort to make it easier for consumers to borrow money and get better terms. Operated by the Bank of Israel, it contains data on six million Israelis and 2.5 million households.

The central bank only collects raw data, but it has authorized two agencies, CofaceBdi and Dun & Bradstreet, to access the information and create credit reports for lenders when they are weighing a loan to a consumer. Consumers can access their file from the central bank and learn their credit score when they apply for a loan.

Although the Bank of Israel is seeking to expand the supply of consumer credit by encouraging new players, like credit card issuers, banks remain by far the largest householder lenders. CofaceBdi data show they account for 91% of all household loans – a figure swelled by the fact that 80% of all household borrowing is for mortgages.

Credit card issues and other financial institutions account equally for the rest of the lending, which reached 545 billion shekels ($154 billion) at the end of last year.