Consumer - Your Credit Rating
Thursday, 24 September 2009
It is more difficult than ever to get a loan or mortgage from the bank in the current climate. This means that if you are looking for a loan you have to be absolutely sure that if you have a good credit history, the report held on you is accurate. Secondly you should be aware that if you do default on payments now, this will have an affect on your credit rating and therefore your relationships with lenders in the future.
With us today we have Tina Leonard, our consumer expert and industry Mortgage Broker Juerg Von Geitz.
How the system works
Most lenders send information on their customers to the Irish Credit Bureau (ICB) (www.icb.ie). When you sign a loan or mortgage agreement you are giving the bank permission to do so and to check. The ICB holds onto this information for five years after a loan has closed. The information is held in 'reports' which you or a bank can access, once permission has been given via a loan application. No-one can access it without your permission.
Most lenders look for information about your income, employment, living costs and existing loan repayments to help them decide whether you can afford to repay a loan. Most lenders also want to look at your credit rating. It can be a good indication of how likely you are to pay back the money. You are likely to have a positive credit rating if you have a good history of repayment on previous loans. Your credit rating may be poor if you missed repayments on a regular basis or failed to pay off a loan in the past.
How to access your credit history
This is very simple. You can fill out an application online, or download it, fill it out and then post it, or request a form by phone and one will be sent to you. It costs €6. Your application will take 3 to 4 days to process and allow an extra day or two if you want it posted to you rather than emailed.
When to check it
Financial advisers say that it is good practice to get into the habit of checking your credit history every year.
This is to ensure there are no mistakes and to know in advance if your credit rating is poor if you are looking to borrow money.
For example, you might have made a mistake filling out a direct debit form and missed a payment on the due date.
Or you might have agreed to take a 'mortgage holiday' with your lender for a few months and the lender has forgotten to update the information given to the ICB, so it looks as though you have defaulted.
How to read it
Your credit report includes:
o Your name, date of birth, address(es) used by you in relation to financial transactions
o The names of lenders and account numbers of loans you currently hold, or that were active within the last five years
o Repayments made or missed for each month on each loan
o The failure to clear off any loan
o Loans that were settled for less than you owed
o Legal actions your lender took against you
o Your score based on two different methods (CRIF and Global FICO)
for each loan on your credit report here are the details that will be on the credit report
Bad Credit Report on the last 24 months of
mean something and the list of meanings are below.
Good Credit Report on the last 24 months of one of your loans. Again the symbol is
explained under the table.
Shows a history of enquiries lenders made about your credit report plus the scores
that the ICB gave them. We also have the range of scores for the three different types of scoring
Juerg Von Geitz - Mortgage broker.
We all know the obvious things lenders look for when considering your loan/mortgage application. But what are the hidden criteria?
. The number one thing the banks look for are gambling habits. If they see money coming in and out from a gambling company alarm bells will sound.
. If you are looking for a large loan (we're talking multi million loans which are dormant at the moment) then they will want to know if you have a drink / drug habit. They will check your accounts to see if you are making large payments in a pub for example.
. When it comes to self employed people they will triple check that their taxes are in good order and that they don't owe any money.
If you have got arrears on your credit report what do lenders consider to be the more serious arrears?
The most serious arrears in the eyes of lenders are the mortgage repayments and car loans. If you have missed either of these two payments they will question how you would be able to repay another loan. As these would be the first two payments you usually make out of you income if you can't pay these how are you going to repay another loan. Missing one credit car repayment or maybe a credit union loan payment would not be seen as being as serious.
How to change it (If there is a mistake on your credit report)
By law, financial institutions must ensure that information they hold or give to anyone else about you is correct and up to date. So you have the right to insist that they correct any incorrect information about you.
If you find a mistake in your report, you must ask your lender to write to the ICB with details of the change, and request a copy of their letter.
Most lenders will act to correct any mistake and amend your credit report immediately however, if you experience problems or delays or if your lender fails to put things right for you, you can consider making a formal complaint and referring the matter to the Office of the Data Protection Commissioner (www.dataprotection.ie).