Credit where it's due

After two schemes were launched last week to help students secure loans, Peter Horgan looks at the importance that credit has in today’s financial world for ordinary citizens

Credit is persistently being described as the lifeblood of the economy in post-recession Ireland. However, how many of us realise how important credit is early on in life? The new schemes by Bank of Ireland, along with what seems to be a rising number of third-level students living within overdrafts, could lead to an increase of bad credit ratings later on in life.

“It is important that students are aware of the impact of a poor credit history and how money decisions they make now such as taking out student loans or using credit cards, will affect their ability to get a loan in the future,” says Ann Fitzgerald, CEO of the National Consumer Agency.

“Your credit history contains names of lenders and account numbers of any loans or credit cards you currently have or that have been closed within last five years and a history of all repayments made or missed for each month on each loan, including any loans or credit cards you did not pay off completely. If you miss repayments on loans now this will impact on your ability to get credit, for example a mortgage or another loan or credit card, in the future. A bad credit rating may mean that you will be refused a loan, even if you have the income to repay it. So, it is important to build up good behaviour and be aware that any missed repayments will be on your credit record for five years after the loan is closed.”

Credit ratings in Ireland is maintained by the Irish Credit Bureau, which acts as a librarian for all the financial institutions in the country that offer lending options. Records are kept on repayment history and kept up to date. The records are designed to prevent people falling into debt and fraud, with records being kept for up to five years.

Bank of Ireland came under criticism last week from the Union of Students in Ireland for its new postgraduate loan scheme, which the USI claim will create a two-tiered education, however the Students' Union in University College Cork is backing a plan from the bank to help undergraduates out in a similar fashion.

“Financially speaking, we see an huge amount of students try and get by in debt to banks, friends and family,” says Dave Carey, Welfare Officer of the UCCSU.

“A lot of students are now living within their overdraft.”

Dave confirmed that many students would not be concerned on their future credit rating, given that having an overdraft and maybe missing one or two repayments in order to stay in their degree is more important at the moment.

“There isn’t a great awareness of it [credit ratings] really. Students weigh up the pros and cons of either dropping out or having a poor credit. If you leave college and don’t have a job, it’s not because of bad credit.”

The Students' Union had previously been the sole contact for students feeling the financial pressure up until this year, where the University has appointed their own full-time Budget Advisor who will advise students on budgets, grants and scholarships available.

For those who are in bad credit, the final word goes to the NCA.

“You can improve your credit rating by making timely repayments on any loans you owe,” says Ms Fitzgerald.

If you are struggling with debt, you should contact your lender as soon as possible, explain your situation and work out an affordable plan so you can continue to repay your loans and minimise any impact on your credit record.”

To find out more about credit rating rights, visits www.nca.ie and for the UCC advisor visit www.ucc.ie/en/studentbudget.