BY JOHN ELLIS, FINANCIAL ADVISOR
Do you know what your credit score is and how it applies to you? Have you been refused a loan recently and as far as you are concerned you are a good bet? The refusal is probably due to your ‘credit score’.
Credit scores are an essential part of financial life across the globe, including Ireland. They are used by lenders to assess the creditworthiness of individuals and to determine whether to approve a loan, credit card or mortgage application.
In the UK and US a credit score is “a numerical representation of an individual’s creditworthiness, based on their credit history”. You have probably seen ads which are targeted to these markets showing how to increase your credit score. It is calculated based on the individual’s credit history, which includes their credit card and loan repayments, credit inquiries, and, most importantly, any missed or late payments.
In Ireland your credit score is held by the Central Credit Register (CCR). Prior to its establishment it was the ICB, a private organisation owned mainly by financial institutions. The ICB deleted its records when it ceased operating and the CCR came into being
This CCR does not grade you or apply a credit rating; the bank you are applying to will decide your loan application based on the information held by the CCR and on their own lending policy.
Every month the CCR collects and stores personal and credit information from lenders, including licensed moneylenders and local authorities, about existing loans or new loans they give to consumers. Lenders who give out loans of €500 or more will have to inform the CCR of these loans. Information on smaller loans of less than €500 is never collected.
The CCR also holds details pertaining to credit cards, mortgages, overdrafts and personal loans, loans from local authorities, licenced moneylenders and business loans. It includes hire purchase agreements, asset finance and personal contract plans.
The record does not include information about instalment orders or attachments of earnings, Insolvency Service of Ireland records, your deposits accounts or tax you may owe.
It will also have your personal details on file including your name, date of birth, current and previous addresses, your PPS number, among other information.
Before you apply for a loan check your record on the CCR. You can request a copy of your credit report online or apply by post.
Your credit report gives a full picture of your credit history, good and/or bad.
You can see if there are any missed payments you are not aware of or, most importantly, see and have corrected mistakes in your credit report because if you missed repayments, didn’t clear a loan or credit card, or settled a loan for less than you owed, it will show up on your credit history for five years after the loan is closed and may result in you being refused another loan.
According to the CCPC website “errors in reporting information to the CCR/ICB can happen”. If this goes unnoticed, it can negatively affect your ability to borrow in the future.
If you believe that there is inaccurate information on your report you should firstly request that this be amended by the lender. If the lender does not amend your information with the CCR, you can complete a form online on the CCR website to have this information amended.
You can explain the reason(s) for a missed payment or circumstances about your loan(s), by adding an ‘explanatory statement’ on your credit report. For example if you have had significant expenses due to relationship breakdown, bereavement, illness or another cause, you may add these details to your record. This statement is added to your credit report and it can be viewed when your data is accessed. However, it may not be taken into account when your loan is assessed.
Only lenders can amend your report, so, if problems or delays occur, you can make a formal complaint to them first. If you are unhappy with the response you can refer the matter to the following: The Financial Services and Pensions Ombudsman and or the Data Protection Commissioner.
You can go to the CCR website to see a sample credit report and explanation of terms. You can request your credit report free of charge at any time but don’t overdo it as you may be charged.