TRW in Joint Venture to Found Mexican Credit Reporting Firm : Finance: Consumers may benefit as retailers have their first convenient database for assessing loan risks.

In the latest sign of the growing use of credit among Mexican consumers, TRW Inc. on Friday announced a joint venture with a small group of Guadalajara business leaders to start what is likely to become Mexico’s first consumer credit reporting company.

D. Van Skilling, general manager of TRW Information Systems & Services, declined to disclose TRW’s investment in the new company, called Comcred. But TRW will have a 20% stake in the Guadalajara-based concern.

Pablo Gerber, the principal Mexican investor, said Comcred will cost “several tens of millions of dollars” to get off the ground.

“We are having to start from scratch,” Gerber said in a telephone interview. The 40-employee company plans to offer its services within 18 months, after compiling millions of reports on Mexican consumers.

Although Trans Union Corp. and the Assn. of Mexican Banks have signed a letter of intent to form a joint venture that will provide electronic credit information, TRW said it has a definitive agreement after two years of discussions.

Traditionally a pay-as-you-go society, Mexico has no computerized network for banks and retailers to share information about potential customers’ financial reliability. While credit cards proliferated with the dramatic growth in the economy in the past decade and the privatization of banks, the relatively few Mexicans with access to credit have had to pay interest rates ranging from 30% to 35%.

The high rates reflect creditors’ attempts to make up for their inability to distinguish good risks from bad ones. Many banks nonetheless have been stung by defaults.

In the past year, the Mexican government has moved aggressively to increase competition among banks and make credit more accessible to consumers and business, including eliminating the law prohibiting the sharing of customer information outside the banking system, increasing the number of licenses for banks and inviting foreign banks back to Mexico after a 50-year hiatus.

“Both Mexican and American banks and retailers will benefit greatly from this service,” Skilling said. “Obviously, it provides additional incentive for American banks and other businesses to expand to Mexico.”

The ability to buy now and pay later “lubricates the economic system,” said John Graham, a University of California, Irvine, School of Management professor who specializes in international business. “Credit cards will do a lot to make things work more efficiently in Mexico and to help consumers purchase products with greater ease.”

Skilling said access to a quick and thorough investigation of potential customers’ credit will lower high financing costs in Mexico. “It will enable companies to make better credit decisions, thereby reducing their risk and driving interest rates down,” he said.

Gerber, who owns a furniture store chain in Mexico, said he and other retailers in the country will benefit greatly from the credit rating service. “Now we have to make a series of calls to a number of banks before issuing credit. But with a credit bureau, we will have the answer in seconds,” he said.