Guide to what is credit

Understanding credit and how it works, as well as enjoying more financial freedom, can help you avoid getting into serious debt in the future
What this guide covers
 What is Credit?
Credit involves borrowing money with the agreement to pay it back at a future date, for example as you would with a home loan or credit card. Before a lender will lend you money they may look at your credit history; this is information made available to banks in Ireland by the Irish Credit Bureau. A bank may take this into account alongside other considerations such as your financial stability and readiness, to determine your ability to pay back the loan.
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 What is the difference between someone having “good credit”, “bad credit” and “no credit”?
You may have heard people talk about good credit, bad credit and no credit. Good credit loosely means you pay what you owe on time and lenders feel confident about lending you money. Bad credit loosely means you may not have paid credit bills on time. This makes it harder to qualify for loans or get low interest rates. No credit means you haven’t had credit before, so there’s no record of your ability to repay the money on time.
 What are the advantages of having good credit?
Having good credit tells lenders that you are more likely to be financially trustworthy.
 How could I build “good credit”?
Here are a few tips:
• Having a good “credit history” will help, for example if you have or previously have held credit cards, loans or a mortgage and have made regular repayments on time
• If you’re planning to borrow, do it responsibly and have a plan for how you’ll repay your borrowings
• Make repayments on credit you already have, for example credit cards, loans or a mortgage, on time
 What is a good credit score?
Your credit score is what individual lenders use to decide if they will lend to you, how much they’ll lend and, in some cases, at what interest rate. Different lenders have a different approach to awarding a credit score, but common factors which may affect your score include:
•Whether you have made or missed payments on credit you have previously held
•What other accounts you have, how many you have and how long you’ve had them
•Your total debt
The better your credit score the better rate you can expect, which means you get a better deal.
 Other Resources
Irish Credit Bureau:
Call: 01 2600 388
Please note: The contents of these pages are not intended to be taken as financial advice or recommendation made by AvantCard. You should seek independent financial advice if unsure about your financial needs.