Smart Banking Guide

The food price is sky high; the petrol price is enough to scare me away. I need a car for transport; I need to have place call home to hide rain and wind. The economy is sore; I need credit to survive the bad time. I went bank by bank, broker by broker. Finally I had some credit, quite expensive. Whatever, hope everything is going to be fine. I concluded these following information; hope can help some dudes like me.

In order to acquire any type of credit from a credit granter (which may be a retailer, a bank, or any other business which sells, provides or grants credit) you will have to show that you are “credit worthy”, ie that you will be able to make the payments required. You may have to complete a rough balance sheet listing the details of your income and expenditure as well as any assets or liabilities you may have. For your application to even be considered, the balance sheet should show that you have sufficient left over to cover your debt repayment.

The primary source of information for a credit granter is a Credit Bureau. Offices like the Information Trust Corporation (ITC) keep information on all the active credit users in the country. The information is gleaned from credit application forms, and the “comments” of credit grantors who access the information. It is theoretically confidential and strictly for the use of credit grantors.

In order to gain access to these records, a credit granter has to prove its own credentials. Depending on the nature of the information they want to access/add, they may then be given a PIN number (like you have for your ATM card) with which their computer system can directly access the ITC database. Alternatively, they can simply request a printout of the information available on an individual

Each time an individual file is accessed, a record of the access is left. In other words even if you just go as far as applying for credit at a shop and they ask for an ITC report on you, it will be recorded that you applied for credit – even if you never actually used it. Many of the credit grantors who are subscribers to ITC add information to the records on a regular basis. This is called Default Data. For instance, certain credit departments updates ITC every month with information on slow or late payment trends, non-payments as well as the outstanding balances on all debtors. In this way a detailed payment history of an individual is built up and a credit granter can see at a glance whether you are over-committed in credit, a habitual late payer, in arrears on any of your existing accounts, or if you have lied on your application form about the number of accounts you hold. Obviously any judgments against you as well as bad debts will also show up.

If you are careless about managing your credit arrangements, it is this kind of negative information that can cause you so much difficulty later.

The strange thing to note about credit bureaux is that if you do not have a record with one, you are unlikely to be granted credit! It may sound odd, but the best way to get credit … is to have credit! In other words, it is a good idea to open an account when you are still a minor, using your parents or another reliable adult as surety (in which case it is their credit worthiness rather than yours that is important) in order to start building a record for yourself. Alternatively, once you have been employed for at least six months, you should apply for an account with one of the major retailers such as Edgars whose policies about granting credit make it accessible to first time credit buyers. Your credit limit will be kept low initially until you have established yourself as a regular payer after which it may be increased.

It is ironic but true that if you insist on always paying cash, and not using credit until you are in your mid-twenties or later, it will be much more difficult to convince credit grantors that they can take a chance on you. Your lack of credit history will actually go against you.

Should an application of yours be turned down, the credit granter is under no obligation to reveal why you have been refused unless you ask. This may be the first indication you have that something is amiss with your credit record. If you want to view your record with a credit bureau, you can do so in person by paying a small administration fee and supplying proof of identification. The process of getting a black mark removed from your record, however, can be very involved. A civil judgment, for instance, remains on your record for five years and even if the judgment is abandoned by the courts, it may still not be removed from your record.

In other instances, however, it may be possible for you to negotiate with the credit granter to remove the default data from your record. For instance, if you have completed payment of an outstanding debt the credit granter may agree to note on your record that the amount is settled, or they may notify ITC in writing and the default data may be removed giving you a fresh start. Unless the situation arose out of some extraordinary occurrence most credit grantors are reluctant to do this.

A Warning Story

A friend of mine recently applied for an account with a well known retail chain store. He holds a responsible position and has been with the same firm for over five years, he has a bank credit card, and he has never “bounced” a cheque in his life, so he was stunned when his application was refused.

Not content to drop the matter he went in to the stare concerned to see the Credit Manager who did not at first want to reveal why he had been turned down. Eventually, however, he told Martin that there was a judgment against him and that he would be unable to obtain any credit until it was removed from his record.

Ta say he was astonished would be putting it mildly – and this highlights another little peculiarity of the law. According ta current legislation, a summons can be issued against you, and a judgment can be passed without you ever knowing about it! In Martin’s case, the judgment arose from an incident same four years previously when he had lived in a commune. There had been some confusion aver the payment of premiums for an insurance policy for the contents of the house after a burglary and as his name was on the policy document, he had been summoned. Unfortunately for him, the summons was issued some time after he had moved out of the commune and it was not passed an, so the creditor obtained a judgment against him without his ever being aware there was a problem!

Luckily it was towards the end of the five year period anyway and he was able to arrange far the record to be dropped due to the unusual circumstances. Still – it was an educational experience.

The lesson? Pay attention to the little things where money is concerned – and take the time to investigate when things go wrong.