The importance of credit rating in Ireland
Did you ever think that you could be denied a job offer just because you have a bad credit rating? Well, this could happen and has already happened with some people (as we will discuss shortly). Some credit card holders don’t realize the importance of credit rating until the damage is done.
Let’s first see what actually a credit rating is. Put simply, credit rating is the rating that tells your credit worthiness. The credit rating is calculated by the designated credit bureaus on the basis of the data supplied by various credit card agencies (or other credit providers / financial institutions). In other words, if you have been defaulting on your credit card bill payments or on the installments of your loan or mortgage, you would earn negative points and hence spoil your credit rating.
The credit rating is the most important parameter that is considered by any bank or financial institution at the time of processing your loan/credit-card/mortgage application. A bad credit rating will almost surely lead to rejection of your application. On the other hand a good credit card rating will see your application sail through easily and quickly.
Some companies check the credit ratings of job applicants in order to determine how responsible a particular individual is. Amazing, isn’t it?
Thus, the importance of credit rating cannot be undermined in any way. You need to be constantly aware of this fact and always work towards maintaining a good credit rating.
The good news is that maintaining a good credit rating is not that tough at all. There are few small things that you need to take care of. Let’s see what these are.
Firstly, you need to ensure that you do not exhaust the credit limit on your credit card. Generally 70% of credit limit is considered to be a good benchmark and you should try and limit yourself to this benchmark. It doesn’t take much to do this. Just refrain from buying too much stuff at the same time. There always are things which can wait. So prioritize your shopping list. If you can’t afford to pay for something with your salary or your bank balance, avoid buying it. You must understand that credit card is not ‘free money’; you need to pay back whatever you spend on your credit card. A small tip is – enter a shop only if you NEED something from that shop and not because it is offering 50% discount, otherwise you will end up buying something you don’t really need.
Another way to control your credit card spending is to use cash on some occasions and leaving the credit card home. This will help especially if you are an impulsive shopper. With reduced shopping power, you will end spending lesser and more so spare your credit card (and the credit rating) in the process.
As with credit card payments, you must also make sure that you don’t default on your mortgage/loan installment payments. All these contribute to your credit rating. Also, do not apply for too many loans at the same time. Not only is it difficult to handle them at the same time but also leads to a bad credit rating (since that is a reflection of you having run out of money).
Broadly speaking, you just need to ensure that you make all your credit card payments in a timely manner and that you maintain good spending habits. This is enough to pave the path to a good credit rating. Especially in todays shopping world in Ireland, it is increasingly more important to have a decent credit rating as many retailers now offer credit.
*** In out next edition, we look at repairing your credit rating ***