By Frank Conway
As the college examination period fast approaches, now is the perfect time to look at a major global issue that can have a significant life impact for every student.
Ever wonder why some people have all the luck in life? Or appear to? Well, sometimes, it may not be down to luck at all. In fact, in many cases, career success can be as a result of long-term planning and some important choices taken early in life.
And early intervention is becoming more and more critical, especially where money is concerned.
Rise in predictive algorithms
Across the globe, the rising use of a predictive algorithm on how we use money is becoming central to making predictions about our financial personalities. This is generally referred to as credit profiling; where how we pay our debits and other bills in the past is being used to predict our future financial behaviour. In other words, each of us is summarised as a three digit number and this number represents how trustworthy we will be with money.
Difficult to escape the net
For most Irish undergraduates, if they plan to live and work abroad, the countries most popular are the UK, the USA, Australia, Germany and Canada. But in each of those countries, a tightening net of financial information means that it will be difficult to escape the data net. In the UK, USA, Canada and Australia, global companies such as Experian, Exquifax, and Trans Union all have some major presence in mining personal financial information. Even in data-sensitive Germany, the much dreaded SCHUFA holds and manages credit information on over 66 million ‘natural persons’. And the data managed is enormous with far reaching consequences. But even here in Ireland, there is little escaping the credit net with a new, more robust Central Credit Register due to begin replacing the existing Irish Credit Bureau (ICB) in 2018.
Far-reaching life consequences
Personal credit information has far reaching consequences for today’s undergraduates. Unlike 20 or even 15 years ago, the use of personal credit information today is far more advanced and used by more and more stakeholders. Those include:
- Insurance companies – credit information is linked to driving premium calculations where those with good credit profiles are more likely to get the best deals.
- Hospitals – in some US cities, hospitals are likely to request a personal credit check before admittance. In some cases, hospitals may refuse admittance if they suspect that any resulting medical bills may be at risk of going unpaid.
- Landlords – in many cities outside Ireland, landlords routinely request personal credit checks as they evaluate prospective tenant applications. Those with the best credit profiles are more likely to get the property they want.
- Employers – many employers, especially in financial services but also in other positions of significance can require that applicants not be under undue financial stress. In financial services, this is done to ensure applicants pass so-called Fitness & Probity rules.
- Credit – and let’s not forget the original purpose of personal credit reports; to assist credit providers such as banks and credit unions evaluate loan applications.
3 simple steps to protecting your personal credit profile
For today’s college undergrads, knowledge is power. In fact, they are in a prime position to ensure they protect and grow their personal credit profile if they do the following:
- Be informed – this comes down to how much they earn, how much they spend and how they can avoid making financial mistakes that can damage their personal credit profiles and financial reputation.
- Be patient – throughout life, they will need to develop the skills of money management and this takes time. But by learning to budget and manage money, those skills will lay the foundations to a strong financial future, and positive personal credit profile.
- Be humble – this is critical. All too often adults fail to ask important money questions simply out of fear. But broad and deep money knowledge escapes most adults so it is important that undergraduates remember to ask the questions that may seem ‘silly’. After all, there is never a ‘silly’ question when it is a matter of protecting your credit profile.
Frank Conway is a qualified financial adviser and Founder of MoneyWhizz, the financial literacy initiative.
Watch this 5 minute video on personal credit reports