Rose Miller, grants manager at JN Foundation, advices that even for young people, who are starting out in their careers, knowledge about the credit reporting system is essential, as it will eventually affect their future employment and access to credit.
“It’s imperative that young people pay close attention to their credit history, as unpaid financial obligations will end up on their Credit Report, negatively impacting their credit rating for many years,” she stated.
Mrs Miller, who is also head of the JN Foundation’s BeWi$e Financial Empowerment Programme, advised that knowing how credit scores and credit reports work is, therefore, an important part of one’s overall financial education and responsibility.
“Even if you have no immediate plan to acquire a Credit Card, a mortgage or auto loan you should know that prospective employers and landlords may check your credit rating to determine whether they will hire you, or rent to you,” Mrs Miller pointed out.
What is a Credit Report?
According to the Bank of Jamaica (BOJ), a Credit Report represents a comprehensive credit profile of a borrower. That includes personal information such as the borrower’s name, Tax Registration Number (TRN), date of birth and a credit summary.
The credit summary comprises the credit accounts held by the borrower, whether those accounts are current or past due; and a record of recent credit enquiries made about the borrower.
Lenders examine a person’s credit history to assess their suitability for a loan, and a poor report can lead to much higher interest rates on loans, or refusal.
Mrs Miller explained that when one borrows money, whether through a revolving account, such as a Credit Card; or, an installment account – an auto or student loan, this data is collated by Credit Bureaus. Jamaica currently has three Credit Bureaus: the CRIF NM Credit Assure Limited, Credit Information Services and Creditinfo Jamaica Limited.
Data collated by these bureaus in a borrower’s credit file is used to calculate the individual’s credit scores. And, one’s credit score is determined by five major factors: payment history, debt balance, age and types of credit accounts, and the number of inquiries about the person’s credit history.
The JN Foundation grants manager informed that a credit score is a number that assists lenders to decide whether or not to approve a loan, and what types of loans to offer and at what rate. The score is computer generated after analysing details of the applicant’s borrowing history.
These scores are then used to determine the applicant’s risk factor for future loans.
“The higher the score, the better,” she informed. “Student loans, Credit Cards, late payments or unpaid loans and even mistakes listed on your report could result in a low score, resulting in your loan application being rejected.”
How to Apply for a Check Report
Mrs Miller advised that everyone should view their credit report at least once per year, as this is an important part of staying in touch with one’s financial profile. “This check is important to ensure that all the information contained in the report is correct. Any inaccuracies should be dealt with speedily,” she said.
“Under the Credit Reporting Act (2010), all Jamaicans are entitled to see what information is contained within their credit profiles. Furthermore, every Jamaican over the age of 18 years is entitled to one free Credit Report each calendar year,” she informed.
To access a credit report, you are required to visit one of the three credit bureaus in Jamaica. You will need to complete a Consumer Credit Report request form; and submit the following documents: TRN; a valid government issued ID; and proof of address.
It takes up to 48 hours for the credit report to be delivered, usually by electronic mail. However, express service is available at the cost of $200.
How Well Do You Use Credit?
Good Use of Credit
Check Credit Report and credit score regularly
Use Credit Card responsibly
Pays all bills by their due date
Pay credit card bills in full to avoid paying interest
Pay off high interest credits as soon as possible
Acquire appreciating assets to create wealth
Poor Use of Credit
Never check Credit Report or credit score
Uses multiple Credit Cards
Makes late payments
Carries unpaid debts
Carries balances higher than 35 per cent of total credit available
Forced to cover emergencies with loans due to the absence of an emergency fund
Ignores student and other loans or misses payments and deferment dates