There has been a lot of interest recently into the area of credit reports and credit scores. These two items, the former a full record of your credit history over the previous 5 years and the latter a 'snapshot' in time of your credit worthiness. By contrast, in the UK and US markets, consumers are aware that they have a credit score and how to easily obtain a copy of theirs. This blog will take a look at what a credit report contains, how to get a copy of your own report and steps you can take to repair any mistakes or damage that it may have suffered during this recession. I discussed this topic in a short segment on RTE1's FourLive show on Monday September 27th 2010.
Who holds my credit report ?
The largest organisation which holds credit information on consumers is the Irish Credit Bureau. This organisation is a "club" of financial institutions whose business deals with lending to consumers - either through a lump sum loan or a rolling credit line, such as a credit card. It is important to note that the ICB is not a statutory government body, but does have the support of its members and certain faculties in government agencies. The ICB has as it's central goal the centralisation, organisation and dissemination of information relating to individual consumers and their credit worthiness. In short, the members of the ICB wish to share information about individuals to whom they have extended credit - both good and bad - for the purpose of helping members of the ICB with their lending decision process. Members of the ICB include financial institutions, credit card issuers, credit unions, leasing companies & local government authorities.
What is a credit report ?
Every time you apply for a line of credit (for example a credit card or personal loan), every time you make (or miss) a repayment on an established line of credit (for example your mortgage, car loan or credit card) a report of the transaction is made to a central database hosted & controlled by the Irish Credit Bureau. Every time you apply for a new line of credit, you consent to the institution you are applying to for that credit querying your credit report with the ICB and obtaining your credit report and your credit score. The institution will use the information in your credit report to assess whether to extend credit to you - or to decline credit.
Who can access my credit report ?
In every application for a line of credit, permission is sought from the applicant for their information to be sent to the ICB to obtain the applicant's credit report. Permission is sought because without this permission, the institution cannot obtain the report - failure to obtain permission from the applicant will deny the lender access to your credit report, and will also likely result in them declining the application for credit. Apart from a lender who is actively determining whether to extend credit, the other person who may obtain your credit report is you. The ICB (under freedom of information and data protection legislation) will provide an individual's credit report to the individual to whom the credit report relates. Only when the identity of the individual has been firmly established will the ICB release this information. An individual may obtain their credit report by applying in writing, either through the post or by using the ICB website. The ICB provides this information and levies a €6 administration charge to the individual to process their application, verify their identity, and send out their credit report.
I have been declined credit - what should I do ?
If you have been declined credit, the first action you should take is to determine why. The institution you have applied to is under no obligation to disclose the rationale behind their decision, so it may come as a surprise. If this is the case, the first course of action should be to contact the ICB and obtain a copy of your credit report. If you believe you have a good credit history for example, obtaining your credit report could help identify a mistake in your history, any fraudulent attempts at obtaining credit in your name, or any other reasons that an institution may have declined credit.
My credit report contains false information about my credit history - what can I do ?
If, when you obtain your credit report, you find there are errors contained, you can take steps to have these reversed. Legislation protects you as a consumer from false information being contained in your report - financial institutions are compelled by law to correct any errors - you have the right to insist that any errors are corrected. The stance of the ICB is to reflect information passed to them by financial institutions - and therefore they will not correct errors unless directed to do so by their members.
When you find an error, you should contact the offending institution in writing, clearly stating where you believe the error to be in your credit report, and requesting that they write to the ICB to reverse the information they provided. In the letter, you should also request that they send you a copy of their response to the ICB. Should be institution respond to you that they belive they have accurately reported your credit history to the ICB, and are unwilling to make any amendments, and if you believe there to be a persistent error, you have the right to contact the Office of the Data Protection Commissioner and seek out a remedy through their complaints process. If there is a mistake made on your credit report, the institution making that mistake is required to correct it - it is in their and your interest to do so, and they will do so - these institutions view the information they provide as 'black & white' - either you made a repayment or you did not - either you rescheduled a repayment or not. Remember, mistakes can and do happen, you should always take steps to protect your credit report and its contents.
I have an accurate credit report - it shows a history which is not perfect. What can I do to improve things?
The recession has produced a huge number of individuals who have missed payments on car loans, credit cards, mortgages and other lines of credit. The most important thing to do if you find yourself in this situation is to approach it head-on. Making excuses does not do anything for your credit report - only your actions can make a positive impact on your credit report. Firstly, if you are having difficulty with your mortgage repayment, contact your bank to discuss the matter and see if they will help you by rescheduling your repayments. If do you not contact your bank, they will have no information on why payments are not being made and they will reflect this by reporting a non-payment to the ICB - on each occasion of a missed payment. Repeat this process by contacting your utility providers, personal loan providers and credit card issuers. By taking this decisive action, you can stop further damage to your credit report, and by sticking to any revised repayment schedules with your bank and credit card issuers, you can improve your credit report as you make repayments - all activity against your loans and credit cards are recorded, both good and bad. Over time your credit report will return to good health.
What can I do to reduce my outgoings ?
Bring the level of your outgoings down by avoiding non-essentials, for example don’t buy coffee or lunch - bring lunch from home and cut out non-essentials. If you smoke, ask your doctor about information on stopping - some health insurance companies offer part-payment to attend courses & seminars on stopping smoking, such as the Allan Carr courses. Call the Revenue Commissioners and make sure you have claimed all tax credits you are entitled to - common tax credits which you may be entitled to include bin charges (€80 per year), home carer’s allowance (€900 per year). Switch your current account to a fee-free one - your bank probably has one and may even drop their fees if you explain you are about to switch because of the charges. Shop around for gas & electricity and other common household bills - be prepared to bargain.
Irish Credit Bureau - www.icb.ie
MABS: Money Advice & Budgeting Service - www.mabs.ie
Revenue Commissioners PAYE Anytime - www.revenue.ie/en/online/paye-anytime.html
Citizen’s Information - www.citizensinformation.ie