Credit history

simu

How is a person's credit history calculated?

I have a credit card and it's usually in debit, not because I can't afford to pay it off but becuase I don't rush to transfer money from my current account straight away when I use my cc. Could this have negative effects on future attempts to get loans?

Thanks!

seamus

Nah, not unless you have a huge CC debt (> €10k) or you have previously failed to pay off a credit card and have found yourself with angry letters from the bank and repossession orders, etc.

When you apply for a loan, the bank (should) takes into account all debts currently in your name, and calculates the amount it wants to give you from that (usually relates to how much you can afford to repay). So a large CC debt won't affect your credit history, but can affect your ability to get loans until the CC is paid off.

The cost of reclaiming loans when someone defaults on a loan is something the banks don't want, so a previous failure to repay or defaulted loan will damage your ability to get loans.

In fact, banks prefer you to be in debt on your CC, so long as you keep paying off your minimum repyaments. Generates more money from them. A person with a clear credit card may be reliable, but they're not generating any revenue for the bank.

BOI recently doubled my limit when I was maxed out for about a month. Previously I was either clear or only a few euro in debt, and they never bothered. :rolleyes:

EKRIUQ

No it won't effect your credit rating (were not in America Now). The only way it would effect your credit rating is if you refused to pay it and thats only after numerous letters and phonecalls. Credit card companies don't like people to pay on time and in full because it means less interest charges and they perfer people who only pay the mimium amout due.
Although they are connected to the ICB (Irish Credit Bureau) They won't give your name or details untill you've become a bad death to them.

simu

That's cool.

Especially as I don't pay any interest on my student account!

Victor

Actually borrowing small amounts on your credit card and repaying them in a timely manner probably helps your credit rating.

RainyDay

simu wrote:

That's cool.

Especially as I don't pay any interest on my student account!

Do you mean that you don't pay any interest on your credit card account? Unless you have a very unusual type of account (or you are on an introductory 0% deal for 6 months), it usually makes financial sense to clear your credit card in full at the end of the free payment period (56 days from the statement date) to avoid interest and fees.

Chipboard

Victor wrote:

Actually borrowing small amounts on your credit card and repaying them in a timely manner probably helps your credit rating.

Sorry Vic - this would be the case in the US where they have a highly developed tracking system with several companies Experian etc monitoring credit usage but in Ireland while its a good thing to have a record of satisfactory repayment of facilities with your bank, the ICB will only take any heed of you if you default, otherwise they just show the amount you owe and a series of numbers or letters to show if repayments are up to date, 1 payment in arrears, wrote off, restructured etc etc. The ICB show only term debt not overdrafts, credit cards etc (revolving debt) unless you default.