Worth getting a loan for the sake of having a record?

Absolut

I'm going travelling for the summer this year, and hopefully I'll have enough saved by the time I go that I wont need to take out a loan. But some people have advised me that it may be worth getting a loan just to have something on my credit history for when I apply for future car loans/mortgages - is it beneficial?

I can get a €2000 interest free for 9 months loan from my bank, so I was thinking that if it would benefit me in the future, I could just take out the full €2000 and leave it sitting in an account someplace with a direct debit set up to pay itself off. Is this useful, or just a lot of trouble for nothing?

Thanks in advance for any help you can give me.

tHE vAGGABOND

Personally I dont think so tbh,

But if you were going to take the loan, you may as well lash it onto a credit card and spend it when your travelling

Absolut

Having an extra two grand when I'm travelling is very tempting, but I'll be in my final degree year when I come back, with no income! So I'm probably not going to be able to pay it back in the interest free time and I'll just end up spending more than I can afford. I'm bringing about €3000 for the 3 months, so it'll be kind tight, but it's all I can afford. The two grand might be a handy emergency back up though?

iremex

banks love it when you take out loans.
why not take out the 2k, leave 1k untouched, i.e. "give" it back at the end of the 8th month, leaving you with only a couple of euros to repay?

what i did was take out a small loan, something that is easily paid back on say a 3year term even though i was going to pay it back within 2 but as my bank manager told me, better take it out over a longer term and pay it back quicker. less interest and better rating.

took mine out in on a fixed rate so i wouldnt get stung with penalties for paying it back quicker.

r3nu4l

Well it's something I did when I was in College, I took out a small loan to buy a PC and paid it back over 8 months.

Two years later I got €6000 for a car loan. Again, I already had €3,500 but I took out a 6k loan. I made sure that I was alloed to make unpenalised overpayments and lump sum payments first.

I bought a car for 6k and immediately paid back 3.5k leaving me a very small loan that I paid off easily.

It all adds up to the credit rating. So does having a credit card and paying back on it every month. The danger with a credit card is that you only pay the minimum every month allowing the debt to build. Eventually this will bite you in the ass.

Paying a monthly bill, utility, phone etc. also adds to your credit rating.

Either way, if you are a sensible person, you won't let if get that far

Absolut

Thanks for the advice so far.

I think it might be a good idea to take out the €2000 loan, and maybe leave €1000 in my current account and then put the other half into a Rabodirect account with a direct debit to pay off the loan. As r3nu4l said, I'll have to check to see what the story is with paying back the loan early on in the non-interest free period.

I've had a credit card for about 2 years now, always paid off in full every month, so that should add to my history too.

Ruu_Old

I took out a small loan when I moved to the US, this was mostly a credit building exercise. The reason was because I had no credit history as it doesn't transfer over.
I am not sure if utilities (phone, electricity) is reported to the credit bureaus. I know if you DON'T pay it then there will be a black mark against you.

G86

Heres something u would need to look out for,

I had a student loan while in college and its now paid off and I have a credit card. I missed a few payments on my student loan so I requested a copy of my credit rating from ICB..who wrote to tell me I dont have one!!

So I rang AIB who say they have my history of loans on their files but that they havent been passed on to icb and my arrears wont affect my credit rating.

Now this is great news for ME, but if you are taking a loan out just to build a credit record then you need to make sure the loan will actually be evident on your record!

Supercell

Hmm, don't think it makes any difference to be honest.

Non/late payments get recorded publically, the rest isnt afaik?

So unless you plan to get a loan from the same institution again then no point in getting a loan to beef up your credit record.

One think I do know is, if you have an MBNA credit card..don't ever ever be late paying, they do put late/non payments on your public record..thus destroying your credit rating.

Might be wrong though, anyone here work for a bank that can confirm?

zokrez

If you are just looking to keep your options ope. I would go to your local credit union and open an account and put in small amount ever week. After a month look for a small loan say 3 times your savings and then start paying it back weekly even daily. Pay the loan off quickly and keep saving a little. Then apply for another loan and do the same. This will help you in a big way as when you go looking for the real loan it will be a gimme/

vector

I also have an AIB credit card (with a spotless record), and when I checked my ICB record there was no mention of it, so maybe AIB don't SEND info the the ICB?

flogen

G86 wrote:

Heres something u would need to look out for,

I had a student loan while in college and its now paid off and I have a credit card. I missed a few payments on my student loan so I requested a copy of my credit rating from ICB..who wrote to tell me I dont have one!!

So I rang AIB who say they have my history of loans on their files but that they havent been passed on to icb and my arrears wont affect my credit rating.

Now this is great news for ME, but if you are taking a loan out just to build a credit record then you need to make sure the loan will actually be evident on your record!

Yup - apparently Student Loans don't get sent to the ICB - so even if you default on one it won't effect your credit rating AFAIK - of course, you will be screwed if you try to get anything from that bank in the future.

Zakrze wrote:

If you are just looking to keep your options ope. I would go to your local credit union and open an account and put in small amount ever week. After a month look for a small loan say 3 times your savings and then start paying it back weekly even daily. Pay the loan off quickly and keep saving a little. Then apply for another loan and do the same. This will help you in a big way as when you go looking for the real loan it will be a gimme/

Again, AFAIK credit unions don't give details to the ICB, so they're useless if you're trying to get a strong rating. Of themselves they can be useful, however. If you have a good record within your branch for a small loan, they'll trust you with a bigger one.