Personal Credit Profiles
When you apply for credit, a mortgage, a car finance loan, PCP car finance, credit card, your application is recorded by the lender where you made that application and also with a credit reporting agency.
In Ireland, that agency is called the Irish Credit Bureau. However, under new credit reporting changes, data collected by the Irish Credit Bureau will also be collected for the Central Credit Register (CCR). The CCR will become the main credit reporting agency with which regulated Irish creditors must refer to when consumer (and some businesses) apply for credit in the future.
Your credit profile — also called your credit report – can impact whether you’re approved for a new car loan, PCP finance, mortgage, new credit cards or loans, and at what terms. It could even be a factor in where you can rent a house or apartment or, in some industries, find a job. For these reasons, it’s clear that your credit profile has a significant influence in your life.
Here’s a look at what credit profiles are, what they include, and a few simple ways to make sure yours is in tip-top shape.
Why Do I Have a Credit Profile?
If your name is associated with a credit-based financial product like a credit card, loan, or an account with credit terms like a utility bill or rental agreement, the lender must report monthly account activity to the Central Credit Register. As a result, you have a credit profile.
What is the Purpose of a Credit Profile?
The type of credit profiles that are used today didn’t exist until very recently in Ireland, although they have been fairly common in other countries for some years. Until recently, creditors that sought a credit report on a credit applicant received a repayment history of any credit arrangement those applicants had open at the time of the application.
But modern credit profiles are much more informative than older-type credit reports. Credit profiles make certain ‘predictions’ about an applicant’s future repayment history whereas a credit report provided historical information about a credit applicants payment history; one predicts the future whereas the other tells the past. This difference really makes a major difference!
Essentially, credit profiles are based on the notion that “past performance predicts future behavior.” For example, the information in a consumer’s credit profile can show a lender whether a potential customer consistently pays bills on time and as agreed, and how much of their credit they rely on each month. For consumers, credit profiles can represent their financial responsibility, and indicate that they should be able to access credit that’s offered at competitive rates and on reasonable terms.
Where Can I See My Credit Profile?
Under the rules of the new Central Credit Register, you are entitled to access complimentary copies of your credit profile(s) once a year. Under the Irish Credit Bureau, which is being replaced by the CCR, there was a mandatory fee of €6 to access a copy of your personal credit report.
What are Important Components of a Credit Profile?
Many factors can impact your credit profile, but there are a few pieces of information that most influence it, and in turn, your credit score:
- Payment history. This is a critical component of how your credit score is calculated. Make sure you pay at least the minimum amount owed on all credit card and loan accounts by the payment due date each month. Should you accidentally miss a payment, it is essential you contact your creditor to make them aware of the problems and inform them immediately when the payment will be sent. Where you use Direct Debit Mandates, if the problems with making the payment were as a result of problems beyond your control (IT issues at your local bank, it is important you make your creditor aware of the problem and be prepared to provide any necessary documentation that proves any missed payments were not as a result of your actions.
- Manage how much you charge. The relationship of how much you owe to how much total credit is available to you is your credit utilization ratio. For example, if your credit card has a credit limit of €1,000 and your balance is €900, this means that your credit utilisation is 90%. A credit score examines this ratio as one measure of how dependant on credit you are.
- Prioritise your oldest cards. The length of your credit history also impacts your credit score. Keep your oldest accounts open and in good standing. This shows that you have a long, established history of using credit.
- Credit Mix. Ideally, your credit profile should contain a mix of revolving accounts, like a credit card and instalment accounts (personal loan, car loan) that have a fixed monthly payment, like a mortgage or car loan.
- Application rate. If you apply for new credit too often, it could make you appear to be a risky borrower who is overly reliant on credit. Remember, it is not just actual credit arrangement that you have open that count, recent application are also taken into account as they signal that you have been in the market for credit for one reason or another. A creditor will generally view this as a situation where you may have a new loan in progress and this will impact your future debt repayment capacity.