Keeping a Healthy Credit Profile
Does your credit profile indicate financial health? If your credit profile is not positive, there are appropriate steps you can take to improve it.
A credit provider, depending on its particular credit criteria and risk appetite, might be worried about any negative information on your credit profile or report. Your credit profile is a reflection of your creditworthiness, and therefore it is determined by you. It is only you that can build your own positive or negative credit reputation that is visible to credit providers. How- ever, it is not only credit providers who will see your credit profile. Often employers and letting agents (when you want to rent a property) also see your credit profile and therefore your profile can have a major impact on your life. It is therefore important to always make sure that you have a healthy credit profile. If not, it might be better not to apply for credit at this time and rather take steps to improve your credit profile before you apply for more credit.
What information may raise a red flag for credit providers? Examples of information include if:
- You have opened a number of credit accounts in a short period
- You have enquired about a loan at various credit providers in a short period
- You use loans as a type of revolving credit, and it seems you are using one loan to repay another
- You have too many accounts open
- There are a number of missed payments
- All your credit limits are at their maximum
- You have a short track record of good payment behaviour
- You only use one type of credit, for example multiple short-term loans (less than six months)
Queries on credit report
Can I query or dispute my credit report/profile?
Yes, you have the right to query or dispute any information on your credit report/profile. You can contact any credit bureau directly with your question, or log a dispute with them. Each credit bureau has its own process that is followed for a dispute. The credit bureau will investigate the dispute and respond within 20 business days. If the information is found to be incorrect, it will be removed. It is recommended you contact the five largest credit bureaus to ensure the information has been removed. If you are not happy with the resolution, you can contact the Credit Ombud on 0861 662 837.
To avoid any red flags on your credit profile, the best things you can do is to keep your credit score up and your credit profile healthy by paying your accounts on time and limiting your total debt payments to less than 36% of your income. Remember, your credit report and credit score tell creditors how you manage money and how responsible you are in repaying debt. Make sure that you do everything you can to keep your credit score high and your credit report clean, it will save you money in the long run as credit providers will normally negotiate lower interest rates with individuals with healthier credit profiles.
Credit Health Tips
Check your credit report once a year. Just like going to the doctor for a check-up, you need to check your credit health. Check your credit report for any errors or possible fraud, and dispute any information if necessary.
Some rules for ensuring that you manage your credit and debt responsibly are:
- Borrow only the amount of money you can afford to pay back.
- If you miss a payment, make sure to be honest with the lender about your troubles.
- Get advice about how to repay your loan from the lender, friends and family.
- Cut some costs to make your debt payment.
- Find ways to increase your income.
If you would like to query or dispute information on your credit report/profile, you should follow these steps:
- Obtain a copy of your credit report from any of the five credit bureaus.
- Contact the consumer care or helpdesk department of the credit bureau with your query or dispute.
- Include a copy of your ID as well as proof of residence to allow the credit bureau to verify and protect your identity.
- Provide a short description of the information you are disputing.
Taking steps towards a healthy credit profile
Here are 20 steps or tips you can follow to improve and build a healthy credit profile:
- Make sure you understand the terms of the credit, and read your agreement carefully.
- Choose your credit providers carefully, and ensure that they are registered with an NCR certificate.
- Set a budget and follow it.
- Expect the unexpected. Ensure your budget includes a monthly amount for emergencies. Build yourself a cash cushion.
- Never use credit for cash, for example drawing money at an ATM from your credit card.
- Always think about your debt-to-income ratio and don’t live beyond your means. This should not exceed 36% of your available income.
- Use credit, but don’t use too much of it. Set a limit, for example 75% of your credit limits.
- Don’t have too many of one type of credit, for example store cards.
- Don’t open too many accounts at once.
- Remember that every credit provider will do a credit check with every application you make, and this will reflect on your credit report.
- Pay your bills and instalments on time. Set up automatic payments via debit order wherever possible.
- Pay accounts in full when you can, as this reflects positively on your profile.
- Whenever possible, don’t pay only the minimum instalment. If you have extra money, use it to pay off some balances.
- Keep balances low and manageable.
- If you have been in trouble, try to show your creditors some stability. If you’ve missed a payment, get current and stay current.
- Do not use one credit product to pay for another credit product unless it is a consolidation loan.
- Keep track of your purchases and use of credit, and inspect your monthly statements.
- Give it time. You did not build bad credit overnight, and so the reverse cannot happen immediately either.
- You should not ignore overdue accounts. If you have any problems repaying your debt, contact your credit providers to make a repayment arrangement.
- Aim high, but not for perfection.