CHAPTER 3

Checking
Creditworthiness and
Evaluation
 Introduction
Today's credit investigator has an easier task because over the years, sources
of credit information have steadily increased. Such growth was based on the
relationship of mutual confidence and respect between and among credit men and
customers. Of primary importance in the development of these relationships
which has been the first and cardinal principle in the exchange of credit
information which are the absolute respect for the confidential nature of inquiries
and replies, identity of inquirer and sources.
It might be more accurate to refer to the customer-credit department relationship
as "in-trust" rather than a confidential relationship. The debtor knows that the
credit department has the ability to release to other creditors information regarding
his reputation and payment record.

The relationship that should exist must be based on two factors:

Confidentiality
Completeness
Code of Credit
Information Exchange
[Link] first and cardinal principle in credit investigation is to respect the confidential information

received.

2. The name of the inquirer in whose behalf the inquiry is made should not be disclosed without

permission.

3. In answering inquiries, the source of the information should not be disclosed without permission.

4. Any betrayal of confidence stamps the offender unworthy of future consideration.

5. Each letter of inquiry should indicate specifically the object and scope of the inquiry.

6. When more than one inquiry on the same subject is sent simultaneously to banks, it should be

indicated that information from their own files is insufficient as other checkings are being made.
Code of Credit
Information Exchange
7. All letters, including form letters should bear the manual signature of the inquirer

to establish responsibility.

8. The receipient of a credit inquiry is negligent in his duty if he does not read

carefully each letter of inquiry and answers truthfully to the best of his ability each

specific question.

9. In answering inquiries, it is advisable to disclose all material facts bearing on the

credit standing of the subject including the basis upon which credit was extended.
Code of Credit
Information Exchange
10. Indiscriminate revision of files when there is no real need for information isa

wasteful and undesirable.

11. Where periodic revision of file information is made, it may be disirable to

give your own experience in the letter of inquiry in order that duplication and

unnecessary correspondence may be kept to a minimum.

12. In soliciting accounts, it is not permission nor the good faith of the soliciting

inquirer to make inquiries from a competitor without truthfully disclosing the

nature and object of the inquiry.

Credit Investigation
and Evaluation
The work of a Credit Investigator may be divided into three (3) major phases;
Gathering of credit
Analysis of credit information; and
Dissemination of credit information

The Credit information will be primarily concerned with the first and third functions,
while the second primarily the responsiblity of credit analysis; if there is such a person in
the creditor’s office; otherwise, it shall be preformed by the head of the credit and
collection department.
More specifically, the investigation
report should consist of:

1. Who is requesting for credit accommodation?

2. Amount and type of the credit applied for
3. Purpose
4. Collateral (Security)
5. Sources and Mode of Payment
6. Nature of the Business
More specifically, the step by step process can be described in the following manner:
1. The Sales Department receives a credit application. The Sales Department may or may
not conduct a preliminary interview with the applicant; but, if in its judgment, the
application is worth looking into, the credit application is indorsed to the Credit
Department for investigation.

2. The Credit Department studies in detail the merits of the application. If it believes the
application is a good sales prospect credit investigation is conducted; otherwise, the Credit
Department refers the application back to the Sales Department together with a
preliminary evaluation report, explaining the reason for the denial of the request.
3. During the credit investigation the Investigator studies the request in greater detail. Normally, he
clarifies points which are vague by way of a second interview with the applicant. Upon the submission of
the credit report, it may be accompanied by an initial recommendation whether or not for denial,
approval or deferment of grant of credit.

4. If the application is supported by collateral, an inspection and appraisal of the collateral must be
conducted. Generally inspection and/or appraisal of real estate or chattels as collateral is ordinarily
assigned to a licensed appraiser who conducts and prepares the inspection/appraisal report. However, if
the creditor's investigator is trained and experienced in appraising, the appraisal may be conducted by
him.

5. Upon the favorable recommendation for a credit grant, the same is forwarded to the Sales
Department for proper invoicing/documentation and delivery. Otherwise, the applicant is informed in
tactful manner that his request for credit is denied.
 ELEMENTS OF CREDIT
I. TRUST OR CONFIDENCE
Trustworthiness implies confidence in the debtor's integrity and in his ability to pay the
loan or credit on the date stipulated and according to the terms agreed upon. It is not
always correct to equate trust with material wealth, social standing or reputation since
trust and confidence are gained from a personal knowledge of the debtor and his
background.

II. RISKS
Credit granting is a risk. This risk increases proportionately to the size of the credit applied
for. A creditor, therefore, has to weigh very carefully all the risks involved in credit extension
of any amount, especially large one. All creditors follow their own guidelines for determining
the "risk factor" or degree of risk of a prospective debtor.
 ELEMENTS OF CREDIT
The recent political, economic and financial instability have increased the number of
risk factors a creditor must take into account in reaching at a credit decision known
them and provide safeguards.

The analysis of a credit risk always involves five (5) factors which are as follows:
1. Personal Factor
2. Performance Factor
3. Economic Factor
4. Risks Factor
5. Security Factor
 MANAGING THE CREDIT RISK
All businesses have risk. Credit risk is the principal problem of selling on terms. It comes
about when the obligor/debtor fails to;
Pay the obligation secured;
Failure of proper documentation;
Failure to register document;
Financial failure of co-obligor, as well as the spouse of the contracting obligor;

Credit risk is composed of:

Performance risk;
Liquidity Risk
Policy and systems risk
Causes of Credit Risks
Credit risks comes about due to the changes in the personal/socio-economic-political
environment. Among these negative developments are:

Adverse macro-economics, business cycle, product cycle, health, financial condition of debtor;
Capacity to absorb disturbances caused by aberrations in cash flow, leverage, capital,
management experience;
Competition and industry trends;
Integrity and reputation problems;
Law and regulatory developments;
Credit performance.

Who Can We Look Up To For Credit Discipline?

Businesses must avoid being secular in their operations. They have not developed positive credit
consciousness among themselves leading to poor credit performance discipline among their target
markets. To a large extent it's attributable to the uneven income distribution among the population.
This is one of the major reasons why micro-lending is becoming a trend in the forbearance of money
business.
Customer's/Debtor's Risk Rating
Creditors, must in earnest develop evaluation and assessment yardsticks to profile or categorize
their debtors as to the following:
Probability of default in performing or paying credit obligation;
Use of financial capacity or performance to arrive at a credit score rating; rather than substantially
character.
Quantitative financial modeling vis-à-vis, default models in a developing economy such as the
Philippines;
Credit risk measure adjustable to meet exigencies by using qualitative credit risk criteria.

Debtors may be assigned risk ratings for:

Credit allocation;
Credit pricing;
Credit approval level;
Credit covenant or conditionalities;
Average, credit loss standards for estimating cost of credit or bad, debt write-offs.
Credit Diversification
Efforts must be undertaken by creditors to have an effective credit diversification guideline
because:

1. It's prudent and good credit management technique. The use of single debtor's limit or group
credit limit must be devised for industries, businesses and individual;
2. Diversification as to debtors, industry, product line will mean "not putting all your eggs in one
basket";
3. Target market criteria has precedence over diversification.

Credit Risk Management Matrix

If these circumstances comes about, a way must be put in place to determine whether or not
such credit risk deviation, can be approved. In this direction a separate credit risk
management group can be formed from the sales, marketing, credit and collection, legal
units to study, pass upon and decide whether or not to approve the credit risk
 ELEMENTS OF CREDIT

III. Period or Term of Payment

Period or term of payment refers to the length of time within which the debtor (with
the agreement of the creditor) must pay the credit, whether this credit be in money,
goods or services. Compliance with the terms of payment is important to the debtor
as this will affect his credit standing or credit rating with his creditor. A good credit
standing goes a long way in ensuring further loan or credit for a prospective debtor.
IV. Exchange of Value
For the credit transaction to have meaning and attain its purpose, there must be a
positive exchange of value; temporal and/or moral; otherwise, the purpose of the
credit granted will be meaningless.-doomed for collection.
 BASIS OF CREDIT
1. CHARACTER
Character to a credit applicant comprises his inherent integrity and personal character. The
credit applicant's personality, moral values, family, social and business relationships must be
scrutinized to determine whether or not he has the moral qualifications to enter into a credit
transaction.

2. CAPITAL
Capital is the property the credit applicant own in his name whether movable or immovable
(cars, jewelry, land, shares of stock, property rights and the like). In the private sector,
particularly in the granting of consumer credit, capital is rated second to character as basis of
credit. The capital of a debtor is almost always looked into when he obtains a loan from a bank
or a financial institution (it should be pointed out that capital and collateral are two different
things in credit management, their exact difference is explained in the heading, "collateral").
 BASIS OF CREDIT
3. CAPACITY
Capacity is the ability of the credit applicant to earn enough to repay credit obtained.

4. CONDITION
Condition is a very intangible basis for extending credit. Condition refers to the debtor's
existing physical, economic, financial, and political situation in his place of
residence/business.

5. COLLATERAL
Anyone who has ever pawned anything knows what a collateral is. For our purpose,
collateral are the other properties whether personally owned or owned by another person
that the credit applicant is able to give as security for the credit obtained.
 BASIS OF CREDIT
6. CONNECTION
You can sum up the meaning of connection in a simple Filipino phrase: "Sino'ng kilala
mo?" Filipinos love name dropping and if you actually know friends or are related with
the person whose name was dropped this fact may be considered by the creditor when
evaluating a credit applicant. A "good connection" does help in getting the credit
applicant may want in credit.
FINANCIAL FACTORS TO
CHECK ON CREDIT
APPLICANT
1. LIQUIDITY RATIOS
2. LEVERAGE RATIOS
3. PROFITABILITY RATIOS
4. EFFICIENCY RATIOS
 LIQUIDITY RATIOS
-Measures the firms ability to meet its maturing short-term obligation.
 LEVERAGE RATIOS
-Measures the extent to which credit applicant has been financed by debt.
 PROFITABILITY RATIOS
-Measures management’s effectiveness as shown in returns generated from sales and investments.
 NON FINANCIAL FACTORS OF
CREDIT EVALUATION
Credit evaluation is generally derived from financial
statements which must be reliable and credible.
There are no accepted benchmarks to determine good or
fair credit risk.
The generally used non-financial factors in credit
evaluation/decision process to grant or not credit are the
following basic factors weighed to have a perfect credit risk
score of 120 points. A marginal risk will score 60 points.
Credit applicant with 30 points is deemed bad risk.
 NON FINANCIAL FACTORS TO
CHECK BASED ON AVERAGE ARE:
POINTS
Payment Performance 30
General Experienced Background 12
Age of Business and Evidence of Sound Growth
Potential 20
Impression of the Applicant and its Management 8
Adequacy of Resources/Availability of Financing 20
Trend 30

120
TOTAL
 I. Payment Performance
(Maximum Points: 30)

A. New Account
1. Uniformly discount and prompt (30 points)
2. Universally slow pay (1-30 days: 10 points, 31-60 days:
5 points, 61 days or more: 0)
3. Mixed Experienced (20 max points)

B. Established Customer (0-30 points)

 II. General Experience Background
(Maximum Points: 12)
A. New Account
1. Balance in Management Skills (0-4)
2. Leadership and decision making background (0-4)
3. Previous success or failure (0-4)

B. Established Customer
1. Evidence of stability or marked progressed (0-12)
[Link] of the Business and the Evidence of
Sound Growth Potential (20 max points)

A. Age (0-10 points)

1. Entirely New Ventures (>10 years: 10 points)
2. Previously established business under new
management. (>10 years: 10 points)
B. Sound Growth Potential ( 0-10 points)
IV. Impression of the Sales Personnel, the
Credit Manager, Other Suppliers
(Maximum Points: 8)

1. Of the principal (0-4)

2. Of their plant and housekeeping (0-2)
3. Of the morale of ther organization (0-2)
V. Adequacy of Resources and Availability
of Financing (Maximum Points: 20)
A. Conduct of Bank Account (0-5 points)
B. Loan Relationship (0-10 points)
1. Borrowers
2. Non-Borrowers
C. Banker’s appraisal of the creditworthiness of the customer
for the line of credit we are granting or contemplating. (0-5)
 VI. Trend (Maximum Points: 30)
1. Review of I-V inclusive contrasting with that with prior years. (0-20)
2. Depth or degree of change (0-5 points)
a. Company considered as an average or average or
better account.
b. Submarginal or poor account
3. Duration of the trend (0-5 points)
a. Company considered as an average or average or
better account.
b. Submarginal or poor account
 PENALTIES PLUS OR BONUS
FACTORS
I. Recent Ligitation (0-20 points) I. Collateral (0-40 points)
II. Recent Insolvency (0-20 points) II. Confirmed Payment Arrangement
III. Age of the Principals (0-20 (0-10 points)
points) III. Performance of Related
IV. Distributive Weakness (0-10 Company (0-10 points)
points) IV. Form of Business Organization
(0-10 points)

TOTAL PLUS OF BONUS POINTS: __

TOTAL PENALTIES: _____
TOTAL BASIC FACTORS:
DEDUCT TOTAL PENALTIES:
ADD BONUS FACTORS:
GRAND TOTAL:
 QUESTIONS
TO ASK ON
PAYMENT
PERFORMANCE
1. PAYMENT PERFORMANCE:
a. Does credit applicant pay primary creditors within terms but
delays payment to secondary creditors or vice- versa;

b. Payment speed is dependent on the discount offered;

c. Does the selling term tends to dictate the payment schedule;

d. Does customer buys from several suppliers within the new or

prospective creditor's industry;

e. Has the customer a history of geographic payment patterns.

2. GENERAL BACKGROUND/EXPERIENCE
a. Is there a good management skills, talents and experience
of the rank and file;

b. Is the credit applicant follower or leader;

c. Is there a record of failure or success in previous business or

dealing with creditors, suppliers, lenders;

d. Is there evidence/proof of performance and trend of

sound/poor management.
3. AGE OF BUSINESS AND EVIDENCE
OF SOUND GROWTH POTENTIAL

a. Less than 12 months in operation;

b. One to three years in operation;

c. Three to five years and operation

4. IMPRESSION OF SALES PERSONNEL,
THE CREDIT MANAGER, SUPPLIERS

a. Is there apparent disagreement, lack or absence of synergy

between and among the owners, rank and file?

b. Is the physical appearance of the office disorderly?

c. Is there low moral of personnel?

d. Is there harmony, cooperation in the rank and file?

 5.
ADEQUACY OF
RESOURCES AND
AVAILABILITY OF
CREDIT/FINANCING
FACILITY FROM
CREDITORS, BANKS
 6. TREND
a. Is there a deterioration of d. Is there constancy in honoring
customers' payment performance; suppliers, lenders, terms for at least 3-
how long; or is it temporal illiquidity; 5 years

b. A pronounced payment stretching e. Is customer affected by seasonal

is indicative of cash flow problem; demands?

c. More frequent non-availment of f. Can the credit analyst determine or

promt payment discount problem; perceive trend that is measurable?
PENALTIES
 RECENT
LITIGATION
a. What is the nature of the case file?

b. Is the suit about trade credit or damages.

c. If the case was paid, settled with suing

parties.
AGE OF OWNERS/STOCKHOLDERS,
OFFICER

DISTRIBUTIVE WEAKNESS
a. Does the customer have good customers
based or thrive substantially on few
customers?
 BONUS
FACTORS
COLLATERAL/ SECURITY
What kind of security is offered?

a. Personal or real property;

b. Surety or guaranty payment bond;

c. Joint several debtors are related/affiliate.

FORM OF BUSINESS
ORGANIZATION

COLLATERAL/SECURITY
a. Proprietorship
b. Partnership
c. Corporation
FINANCIAL FACTORS OF
CREDIT EVALUATION
In analyzing financial performance of credit applicant it’s
practical to analyze the cause and effect of the numbers in the
financial statements. Remember the following guideline in the
evaluation process:
1. There is no absoluteness in life including the
financial performance of companies. Life
performance is relative;

2. For every effect there is always a cause which

may be single or multiple causes;

3. Financial cure must be directed to the cost to

attain the purpose;
4. Benchmarks or standards must be established
as a tool to detect credit dangerous signals or
problems;

5. Cures must be applied with prudence,

discernment, dependent on the complexity of the
financial imbalance, resources and skills available;

6. There is abnormality whenever the company's

performance exceeds the upper or lower quartile
of industry average in any ratio.
THE CREDIT
SCORECARD
A TOOL FOR CREDIT EVALUATION
 There must be some objective, practical way for
creditors to personally talk and discuss with its credit
applicant to be able to assess more intimately the credit
applicant and arrive at generally objective credit decision
whether or not to grant credit.

Generally, the results of the field credit

investigation and/or the salesman's assessment most
often, results or contribute to delinquency or worst to bad
dept. A way must be developed to be able to avoid
substantially the prejudices, biases and subjectivity
toward the credit applicant.
PURPOSE OF THE
CREDIT
SCORECARD
To make certain that all the
elements and bases of credit are
asked, scrutinized and evaluated
to avoid nothing and making it
expeditious to obtain a generally
objective credit score from the
credit interview with the credit
applicant;

1.
To be able to assign a generally
realistic value or point to the
answers to each of the questions
ask and be able to obtain an
overall impression of the credit
applicant as well as different
transaction to be financed;

2.
To have a greater degree of objectivity
and neutrality in the process of
assessing, evaluating the credit
applicant; thus avoiding polarization
and subjectivity on issues of
personalities biases and prejudices
against the person and avoid
overlooking other more important
issues or matters;

3.
To enable and allow the creditor as well
as to create an applicant to look for
ways and means in improving the
credit and the transaction applied for
specially with regard to risks reduction
or elimination if possible;

4.
To have a standard credit evaluation
yardstick for the credit man to use in
approving or denying a credit;

5.

To be able to collect, develop credit

information data on credit applicants.

6.
SPECIFIC NEEDS
FOR A
CREDIT
SCORECARD
1. To determine the risks level or degree on the credit applicant.

2. To evaluate the adequacy of rest cover or security or collateral.

3. To assist in developing the credit transaction or payment modes for

the transaction.

4. To assist in determining the credit levels or amount to be granted,

the credit term or period to be extended.

5. As a source of auditing information for the credit transactions.

WHY USE CREDIT SCORECARD?
1. You must decide why you want a credit scorecard system

2. Decide whether or not the scorecard is just for one or

more purposes

3. Availability of the credit and collection information or data

WILL IT BE MANUAL OR COMPUTERIZED?
If the credit scorecard is to be used as a checklist during the
credit interview with the credit applicant, you may want to
use a manual system to avoid impersonal disconcerting
impression given out by a computer.
However, the credit and collection data obtained during
the credit interview may be fed into the computer after it
has been weighed, assess and evaluated for the session or
recommendation, which may be coded.
MAINTENANCE OF THE CREDIT
SCORECARD
Will it be entrusted to outside credit and collection professional
or under the creditors' on operation? It may depend on
availability of professional, external assistance and the
capabilities and interests of one's credit and collection staff. It
can be a mix of internal and external participation which may
be a practical idea.
DESIGNING A CREDIT SCORECARD
SYSTEM
The main objective of the system is to bring out from recorded
applicant to good and bad aspects of trustworthiness,
confidence in him, the risk on this person or business or
employment; the period or term of payment he wants, the
capabilities and capacities to earn and repay the credit applied
for; and, the exchange or trade-off of temporal and/or moral
values for the credit to be extended.
A sample of credit analysis questionnaires
may be on the following aspects:
Credit applicant's personal background or circumstances;
Credit, legal records, cases for or against the current
applicant;
Sales, credit performance, projections;
Risk factors on the person, business, and community;
Term or period of past financial obligations with creditors;
Security or collateral package and applicable cases;
Exchange or trade-off of temporal and/or moral values for
the credit applied for;

Other relevant, pertinent questions to buttress the

favorable possession of the various good attributes of the
elements and basis of credit by the credit applicant.
GUIDES IN
ASSIGNING
CREDIT
SCORECARD
POINTS
1. COLLECTING OF RANDOM SAMPLES
OF CUSTOMERS' CLASSES THAT THE
SCORECARD WILL DISTINGUISH.
a. Good risks
b. Medium risks
c. Fair risks
d. Bad risks
2. DETERMINING WHICH CHARACTERISTICS ARE CONSISTENTLY
ASSOCIATED WITH ONE OR THE OTHER CLASS OF ACCOUNTS;

3. WEIGHING THE RISK FACTORS BY ASSIGNING HIGH POINTS TO

THOSE CHARACTERISTICS ASSOCIATED WITH THE GOOD ACCOUNTS
AND LOW POINTS TO THE NEGATIVE CHARACTERISTICS ASSOCIATED
WITH BAD ACCOUNTS;

4. COMPARING THE POINTS AGAINST INDEPENDENT SAMPLES OF

GOOD AND BAD ACCOUNTS TO DETERMINE WHETHER THE SCORE
SUSTAINS THE CREDIT DECISION.
 ADVANTAGES OF CREDIT
SCORECARD
1. CREDIT POLICIES MAY BE REVISED MORE OBJECTIVELY TO MEET SALES MARKETING,
CREDIT AND COLLECTION SITUATIONS.

2. IT MAY PROVIDE A BETTER GUIDELINE TO LESS EXPERIENCED CREDIT MAN IN

ARRIVING AT A CREDIT DECISION;

3. IT MAY MITIGATE COSTS OF CREDIT INVESTIGATION.

4. MAY PROVIDE GOOD MONITORING AND CONTROL OVER THE RISKS OF NEW
ACCOUNTS.
“Credit scorecard is a sort of
mathematical evaluation of
credit risk based upon the
law of averages. The system
reduces the possibility of
judgment being influenced
by irrelevant, subjective
factors.”
 Samples of credit scorecard for
individual with Capacity Bias
A. Credit applicants personal circumstances, background --------10
B. Personal credit records, performances either creditors ---------15
C. Capabilities ----------------------------------------------------------20
D. Financial performance, projections--------------------------------20
E. Risk factors -----------------------------------------------------------10
Sample of credit scorecard for
individual with Character
Attribute Bias
A. Credit applicant personal circumstances, character background -------25
B. Personal credit records performance with creditors ----------------------15
C. Financial performance projections ------------------------------------------20
D. Risk factors ---------------------------------------------------------------------10
E. Payments or term mechanics ------------------------------------------------15
F. Security package ---------------------------------------------------------------15
100
ADOPTING, AMENDING THE
CREDIT SCORECARD
The credit scorecard is not an inflexible, rigid credit management tool. It
must, to be effective and efficient credit analysis tool be reviewed
regularly and amended. It may include and reflect any socio-economic -
political risks affecting the creditor/debtor. By doing so it may jibe and
support the existing credit and collection policies, procedures of the
creditor thus, ensuring the attainment of more, good collected sales
(loans).
THE PERTINENT FACTORS TO
CONSIDER ARE:
1. How many copies must it be?

2. Will it be the supporting the credit approval/ denial?

3. Will it be filled with the sales (loan) i credit documents?

4. Will the credit information or data obtained be put into the credit database.

5. Will data captured be carried out by the credit, sales and other department
staff after use?
THE CREDIT EQUATION
On the presumption that normal transactions and the same conditions apply to
the credit risk of a creditor, the credit equation may be as follows;

Character + Capacity + Capital + Condition = Good Credit Risk

If however, any of the basis of credit factors is impaired but not totally absent the
nature of the credit risk involved may be as follows;

1. Character + Capacity + Insufficient Capital = Fair Risk

2. Character + Capital + Insufficient Capacity = Fair Risk
3. Capacity + Capital Plus Impaired Character = Doubtful Risk
4. Character + Capacity - Capital = Limited Risk
5. Capacity + Capital - Character = Dangerous Risk
6. Character + Capital - Capacity = Marginal Risk
7. Capital - Character - Capacity = Poor Risk
8. Character - Capacity - Capital = Very Bad Risk
9. Capacity - Character - Capital = Fraudulent Risk
If however, any of the basis of credit factors is impaired but not totally absent the
nature of the credit risk involved may be as follows;

1. Character + Capacity + Insufficient Capital = Fair Risk

2. Character + Capital + Insufficient Capacity = Fair Risk
3. Capacity + Capital Plus Impaired Character = Doubtful Risk
4. Character + Capacity - Capital = Limited Risk
5. Capacity + Capital - Character = Dangerous Risk
6. Character + Capital - Capacity = Marginal Risk
7. Capital - Character - Capacity = Poor Risk
8. Character - Capacity - Capital = Very Bad Risk
9. Capacity - Character - Capital = Fraudulent Risk
WHEREABOUT/
SKIP TRACING
 General Steps for
Whereabout/Skip Tracing
1. Avoid thoughtless plodding 2. Exercise good judgement in 3. Don’t be rigid in
through series of routinary selecting the more promising your sequence or steps
tracings or unverified leads from earlier investigation
information gathering

4. Proceed from those inquiries

5. Be objective, consider the
which are most likely to bear fruit
costs of whereabouts/skip
to those which are less likely to do
tracing-it’s expensive.
so
 KINDS OF SKIP
A debtor is deemed a skip when he cannot be found at the
address(es) he has given or should be.

Haste in changing or moving from one address to another may

have forgotten to leave any forwarding address.

Other may have relied on someone else to take care of

furnishing the forwarding address to inquiring third persons.

At times the skips begin in this innocent manner, but as time

goes by and nothing happens, he becomes unwittingly or
wittingly become forgetful.
 KINDS OF SKIP
Some skips are deliberately deceitful, premeditated, and
cunning, with no intention of paying their debts. They
exploit creditor negligence and avoid payment, earning
the label "credit criminals" or "crocodile debtors."

It may be a big mistake if you treat all skips or debtors

who may not be found in his given addresses as wittingly
evading payment of their debts.
 Tactics of
Whereabout/Skip
Tracing
Artful Deception
Artful deception in skip tracing uses clever tactics to locate
debtors who intentionally evade payment, often called
"crocodile-like" for their deceitful behavior. Skip tracers may
adopt similar strategies to overcome these challenges, justified
as "fighting fire with fire," provided their methods remain ethical
and legal. They must avoid causing harm, emotional distress, or
breaking laws, such as impersonating officials. Deception should
only be used when necessary, harmless to others, and the only
viable way to locate the debtor.
Gimmickry & Gags

Successful skip tracing requires more than knowing gimmicks; it

demands skill, art, and expertise in acting and creating believable
personas. A skilled skip tracer can make even unlikely stories
convincing through their ability to craft a credible atmosphere and
character, making the role itself less important than the art of
playing it effectively.
Gimmickry & Gags
PROVEN, SUCCESSFUL
GAGS AND GIMMICKS:

Taxi, jeepney/ truck driver, who may have found a wallet with some money,
address, telephone number and the like, left in his vehicle belonging to the skip.
As insurance adjuster or investigator checking on an application for group health or
educational plan.

A buddy from the skip's days in service with former employer(s), army and the like;

At times the skips begin in this innocent manner, but as time goes by and nothing
happens, he becomes unwittingly or wittingly become forgetful.

A debtor of the skip who wants to pay a personal, previously secured loan
Gimmickry & Gags
PROVEN, SUCCESSFUL
GAGS AND GIMMICKS:

A door to door delivery man who has a letter/package and the like for the
skip from the province or abroad

A childhood friend way back in the province, school and the like
A direct selling salesman selling some cosmetics, clothing, shoes and the
like
A survey and research team member in the community doing some
research and survey for a product or service
Talent scout looking for would be participants in a radio and/or television
program.
 Dangers of Gimmicking
and Subterfuge
Gimmicking and subterfuge can backfire, as most people dislike being
tricked. If your deception is uncovered, it can ruin trust and prevent
cooperation, making it harder to get information. It's often more effective to
use straightforward methods unless absolutely necessary to resort to
deception.

Honesty tends to be the best tactic and works in most cases, especially
when dealing with skips who are more likely to cooperate once located.
Those who go to great lengths to avoid being found will likely avoid paying,
making such efforts economically questionable.

Avoid deliberate misrepresentation unless unavoidable. Your inquiries

should be conducted with prudence, discretion, and careful judgment,
without crossing into deceitfulness.
 Where to look for
Skips?
Place of Employment Credit Bureau

Previous Employers Wife, legal and common

law ones
Trade and Personal References
Children
Landlord
Relatives in laws
Neighbors
Neighborhood
business/ association
 Property Checking on
Debtors
Many sums of money as well as criminal cases with adjusted
pecuniary damages against the defendants debtors accused
are ‘empty victims” due to absence or lack of a good property
checking owned by them against which the pecuniary
decision can be enforced against.

Locating properties owned by debtors (accused) is generally

easier than locating their present whereabouts. There are
places, offices, and institutions to check a person’s properties.
 Where to look for properties?
AMONG THESE SOURCE OR RECORDS OF PROPERTIES BY PERSONS ARE;

Assesor’s Office Patents Office

Register of Deeds Stockbrokers

Land Transportation Offices Sports or Leisure Club

Classified Advertisements National Library|IPO|Patent

Office for Copyrights/Patents
Real Estate Brokers
Barangay Records for local
residents