The Central Bank is keen on collecting data on its users, especially when they are looking to take out a larger loan in the future. The Central Credit Register, established in 2013, has been a beneficial tool for both parties in obtaining and storing financial information.
This tool is “a new secure system for collecting personal and credit information on loans of €500 or more” according to their website. All of the data that the bank uses to calculate your credit score is reported by people or institutions that are currently lending you funds on a monthly basis.
These reports are on a multitude of information, which include credit cards, overdrafts, different kinds of loans, and mortgages. This information is all pulled together to identify you as a possible consumer and give lenders a look at your reliability before making any offers. You can access this score in the form of a credit report by request.
As of 30 June, 2019 the Central Credit Register will begin to expand their requirements to include personal contract plans (PCP), hire purchase details, and a few smaller financial details. In the past, the bank has been heavily criticized by other financial institutions and within the Central Credit Register for not requesting these important financial records.
PCP agreements are created when someone is purchasing a vehicle and consists of three parts: deposit, monthly repayments, and the final lump sum payment. This market has in the past year totaled €1.4 billion, which is a huge area of collection that has a significant correlation to ability to repay loans. These extra details will be very beneficial for lenders to holistically review a person’s financial fitness.
There are both pros and cons to this increased data collection. For example, a person may have earlier in their life taken out a loan or purchased an item that was beyond their financial capabilities, causing them to miss a payment or extend the term of repayment. If these purchases exceeded the value of €500 and are in the two new collection categories, they are now to be recorded in a person’s credit score.
These mistakes, possibly years old, can decrease a person’s credit score and their ability to get a loan with all the conditions that they are looking to receive.
In general, this change is significantly better in getting an overview of someone’s financial health, but does not take into consideration the possibility of a financial downfall sometime within a consumers life. Because of this, there may be an influx in loan rejections.