The Pecuriality of Japanese Credit Bureau

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We have three domestic credit reporting agencies in Japan. They are not the government credit bureau, but the subsidiaries of multiple financial institutions.

The data of credit reports must be used solely for financial lending purposes by the Banking Act. It can’t be used for the general due diligence for consumers. Financial institutions are sharing these databases by joining the membership of the credit reporting agencies.

Therefore, the industries of employment screenings and tenant screenings are excluded from the credit reports.

Juminhyo database, or the citizen documentation database in Japan, is strictly confidential in Japan. The database is controlled only inside the government. and it will never be shared with a third party and no private companies can make use of this database.

Please check if Equifax or Experian operates in Japan. They are the world largest credit reporting agencies. But they haven’t been able to penetrate into Japanese market due to the legal issues:
– Credit reports must be used solely for financial institutions.
– There are no public records whatsoever in Japan except real estate and company registry records.

In the past, employment screening agencies, illegally, got access to those databases through corrupted financial institutions. But there was a severe series of crackdowns by Japanese police and almost all the corrupted agencies and PIs were kicked out from the industry.

For the tenant screenings, more and more management agencies of real estate properties are tieing up with the recently emerged credit guarantee associations and encourage tenants into contracting with these associations. That way, the management agencies and owners of real estate properties can indirectly get access to some sort of credit reports nowadays.

The business model of online based instantaneous background checks can’t exist in Japan unless the purpose of background check is for financial lending or underwriting.

This issue is one of the reasons for the decline of the entire PI industry in Japan as well.

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