Building your credit record

A good credit record is very valuable to you as this information is used by banks and finance companies when they are deciding whether to approve your application for a new loan or credit card, or when managing existing such as increasing your borrowing limit.

It takes time to build up a good credit record. You can achieve this by:

• Paying bills on time
• Not filing for bankruptcy
• Not having any court action taken against you for non-payment of debts

These all add to a good credit history. Long years of managing your finances well builds up and if you have a record of good up repayment, a lender is more likely to offer you a credit at lower rates of interest. This is because interest rates are based on how risky you are, and judgment about risk is based on credit history. Treat your credit record like a precious commodity that’s hard to replace once you lose it. You need to protect it carefully as it will affect your chances of getting a loan or credit card application approved when you really need it. Managing your financial affairs well will help you improve your credit record and your ability to achieve your dreams.

• Easier access to credit, lower interest rates on loans
  
• Tells employers, banks and anyone who is considering entering into an agreement with you that you are trustworthy
  

• Harder to access credit products, higher interest rates, difficulty getting products like loans
  
• Suggests to banks that you may not fulfill credit agreements
• May negatively affect your chances for future employment
  

• No credit history is better than a poor credit history, however it may still be difficult to access credit
• As an alternative, lenders may look at regular payments, history of rent, utility bills, and other large expenses to see how you’ve managed your bills in the past
  

A credit score is a number that indicates the status of your credit record. This number changes when information in a report is updated depending on your credit behavior. The amount of debt, type of credit, length of credit history, and payment behavior, among others, affect your credit score. For example, your credit score may drop if you make late payments on a loan.

The financial service industry uses many different credit scores. These may differ from lender to lender, or from type of credit (credit card, loan, etc.). Scores are determined from credit-scoring models developed by these lenders. Part of their approval process is to compare your score with the scores of people with similar credit profiles.

A score shows a lender how likely you are able to make repayments on a loan, and if you can make these payments on time.

You’re also encouraged to pay more than the Minimum Payment Due to lessen your balance faster. Making just the Minimum Payment each month will keep you in debt for a longer period of time and cost you a lot in interest and charges. Save money by paying more than the minimum amount each month. Your credit card gives you financial flexibility and how you choose to repay your balance influences your financial well-being. 

This credit guide has been developed by HSBC to ensure the personal financial health of our customers in the Philippines. The information contained in these pages is not intended to provide professional advice and should not be relied upon in that regard.