The Irish Credit Bureau stores details of credit contracts and payment histories for every loan in the State, and this database provides basis for institutions to assess a person's credit rating, writes Clare O'Dea
Borrowing is an essential part of money management for most households but, with so many different sources of finance, how do financial institutions keep track of their customers? Perhaps not surprisingly, they pool their information, and the main resource they use for this is the Irish Credit Bureau (ICB).
The ICB computer system stores details of credit contracts and their subsequent payment histories for every loan in the State. If you have been repaying a loan of any description in the past five years, all the repayment details are on record at the bureau.
Personal credit histories - including repayment details on mortgages, car loans and overdrafts - are recorded on a single database that can be accessed by all the big lenders in the State. The information is updated monthly or more frequently by the participating institutions.
The ICB does not use or analyse the data; it just acts as an electronic librarian.
So how and when is the information used? When a person applies for a loan, the bank or building society concerned relies on several sources of information to assess the credit risk. The institution will seek information from loan applicants, whether new or existing customers, about their recent credit history and their capacity to repay further loans. This information then forms part of the lending institution's records.
The ICB's 36-member institutions may also provide this information to the bureau. The data held by the bureau can only be disclosed on request to financial institutions registered as members and to the individual to whom it relates.
Anyone can obtain a copy of their ICB record for a nominal fee of €6. The bureau is obliged to provide the information within 40 days, although it usually aims to deliver it to consumers in less than a week.
When an error is brought to the attention of the ICB, and is confirmed by the institution concerned, it is corrected. An individual who feels that a record requires explanation can choose to have a 200-word commentary added to it. This might relate to why there had been a delay in repaying a previous loan.
Apart from the aforementioned data, a record will show the date, time and identity of all institutions, if any, that have accessed it in the previous 12 months. So you can find out who has been checking up on you.
If you have had credit problems in the past, that information will not be held indefinitely. The data held by the ICB is taken off the system five years from the account completion date, irrespective of the relevant payment record. This policy is at the liberal end of the spectrum, according to Mr Séamus Ó Tighearnaigh, chief executive of the ICB. Many other countries store credit information for longer.
ICB files show that at least eight out of 10 credit records have positive payment histories, Mr Ó Tighearnaigh said.
After reviewing credit-related data on a loan applicant, banks and building societies make a determination based on risk models created from payment profiles of customers.
Abroad this process is normally carried out by commercial credit-scoring agencies rather than by individual lenders. Credit scoring measures the statistical probability that credit will be satisfactorily repaid.
The Irish Bankers' Federation (IBF) explains that by attributing a value to each of a range of applicant characteristics - including employment history, income, home ownership, age and credit track record - credit scoring helps calculate the level of risk and reduces the element of subjectivity in lending decisions.
This method allows lenders to run their business more effectively and it benefits the majority of their customers who wish to borrow only what they can afford to repay, the IBF says.
Under data-protection law, data can only be kept on borrowers who agree to it, but most loan applications include a credit reference consent provision.
If you find that the information held by the bureau is wrong or incomplete, there are several ways to correct it. The first step is to contact the lender. If the issue cannot be settled, contact the Data Protection Commissioner, or the Ombudsman for Credit Institutions if you are out of pocket due to an error.
Last year the Ombudsman for Credit Institutions received 34 complaints relating to credit-rating records supplied by financial institutions to the Irish Credit Bureau. Of that number, 23 were settled by the internal complaints procedure of the bank or building society concerned. Five of the remaining 11 complaints were upheld and awards were made, ranging from €127 to €1,500.
According to the Ombudsman, Mr Gerry Murphy, how the case is dealt with depends on what has happened to the person.
"Sometimes it's just a matter of inconvenience and annoyance. But sometimes it's worse; for example, a credit card application might be refused, and then the person must be compensated."
The information held by the bureau is strictly for credit reference purposes and cannot be used for other purposes, such as direct-marketing campaigns.
The ICB receives several thousand requests each year from people who want to check their credit record. It can be a useful exercise.
Some borrowers are driven by curiosity and just like to double-check the information held on them is correct. But others have used it as a bargaining chip in attempting to get a better rate of interest from the bank or building societies.
Irish people who have moved overseas have been able to use a good ICB credit record as a reference to obtain loans or credit cards in countries where they have no credit history.
For more information, contact the Irish Credit Bureau, ICB House, Newstead, Clonskeagh, Dublin 14. Tel: 01-2600388.
The Data Protection Commissioner can be contacted at Block 4, Irish Life Centre, Talbot Street, Dublin 1. Tel: 01-8748544 or www.dataprivacy.ie
The Ombudsman for Credit Institutions is located at 8 Adelaide Court, Adelaide Road, Dublin 2.Tel: 01-4783755.
