One’s credit card and loan payment history is the primary way of determining one’s credit history in the Philippines because our country has no existing credit bureau despite the passing of R.A. 9510 last October 31, 2008, whose goal was to for a credit-governing body in the Philippines. The Credit Information Corporation, headed by Jaime P. Garchitorena, has been formed last June 2015 to carry out the republic act on credit monitoring.
This entity is getting credit data from financial institutions in the country to build a national credit history database which is targeted to be completed by June 15, 2017.
While this is still on its way, lenders still depend on your credit card and loan statements as a basis of your credit history. Your credit history is important because this is what financial institutions use to decide if your credit card, postpaid broadband plan, or personal loan applications will be approved. However, there are inevitable times when you just can’t help but ruin it and eventually impact your credit score.
Here are some of those ways:
- Run up a large balance on credit card.Leaving a large amount in your credit card balance can hurt your credit history. Always be reminded of your cash flow whenever you’re on the verge of shopping with your credit card. Gauge if you can repay everything you since this will help you on controlling the piled up purchase list on your bill.
- Open several accounts at onceMaking credit and loan applications to financial institutions within a short period will cause your credit score to drop. Keep your applications at a slower pace. Managing lots of credits at once are fine as long as you are responsible for your financial obligations to them but opening accounts at once will decrease your score. Waiting until three months before applying for a new loan or credit card is the ideal span.
- Pay inconsistentlySometimes you pay and in some months you miss it. These inconsistencies will not contribute to a good credit history. A good pace on paying your debt will help you shape your credit history since this will show that your responsibility in settling payments at a financial institution.
Lenders look at your 6 to 12-month course of payment history. Missed payments on some accounts are not as harmful to your score compared to missing all your accounts, but that puts financial institutions on alert mode whether you’re still going to pay or not. If you’re just slacking off on paying all of them, work on aligning payment due dates to when you get your salary.
- Close several accounts at onceWhen we think of avoiding debts, the natural tendency is to shut off multiple accounts. A part of the computation of your credit score is the length of your credit. Closing old accounts will make your credit history shorter than it should be. Also, it is mistaken that closing your account will boost your credit score because you will have fewer obligations of repayments, thus, fewer debts. Closing down accounts will decrease your total amount of available credit.
Always be conscious in keeping a good credit standing and good things will come your way, financially – and later on, on most aspects of your life.
Bea Bongat writes for MoneyMax.ph, a financial comparison website aiming to help Filipinos save money through diligent comparisons of financial products.