Do I need a Credit Card?

Paddez

Hey,

Sort-of a banking advice question here.
I'm sort of looking to build up a credit rating as currently I've never had to take out a loan (Luckily), and I'm sure having a decent credit rating will benefit me in future.

I've heard that using a credit card can help if you make sure to pay it off each month.

Is this advisable?
Are there any perks I can avail of with a credit card without getting stung?
Are there better ways of building up credit?

Thanks!

VandC

why are you looking to build your credit rating?

Paddez

VandC wrote: »

why are you looking to build your credit rating?

To be honest, I don't really need anything right now.
Its just I find myself in a relatively stable financial position right now so I thought it'd be worth doing for later down the road.

VandC

as far as I know that used to be the case, but I applied for a mortgage this year and all that they were interested in was my repayment capacity, IF I had any debts and of course my savings.

So the savings were for the deposit and additional charges. I do have a credit card which had less than thousand on it, they didn't seem that interested in it but I still had to give six months statements and I'm sure they did a background check to make sure all payments had been made on time. I haven't had loans in years (more than five years anyways) and they didn't question those. I have heard that if you owe on a credit card or loan that it could be taken away from what they would lend you, eg if you owed 5,000 on a credit card and they could have loaned you 100,000 based on your criteria they will now only give you 95,000.

repayment capacity can be shown to them in a few ways. for example if you meet criteria for a loan of 250,000 and for ease say repayment are 1,000 a month then you need to show you can afford this either by saving this amount monthly and not touching it or by renting a place for this amount (rent that would cease once you took the mortgage ). you could also do a combination of this ie 500 rent and 500 savings. if you can save more than what you are expecting repayments you should, it will only go in your favour. not sure if a loan that was about to end shows repayment capacity, although technically it should but not sure if bank would accept.

years ago I was told I couldn't have a credit card because I didn't owe any money even though I only just had a credit card but as bank was leaving country it was ceased and a loan that I just finished paying with no late payments in the previous three months. I think (and hope ) those days are over. needless to say I argued it with the bank and of course got the credit card (was ridiculous logic if you ask me!!) :-)

I am of course open to correction on this, maybe somebody else more in the know will confirm or correct the above.

Hope this somewhat helps you

coylemj

I would say that if you don't really need a credit card, don't bother getting one because there appears to be really only a downside which is that if you forget to make one monthly payment, it can end up as a black mark on your record. What might be better in terms of building up a 'credit history' is to ask your bank for an overdraft facility whereby you are allowed to go into the red up to a limit of (say) €500 or €1,000. Then dip into that facility for a few days each quarter but mainly stay in the black and you'll have a history of having had credit.

Trish56

I would agree with VandC. If down the road you are looking for a mortgage or indeed any loan the lender will be looking for proof of repayment capacity. This can be in the form of regular savings only or savings and rent. Lenders also look for good management of current accounts as in no referral fees, not going into overdraft or unpaid direct debits. If you are paying rent make sure you pay by online transfer or standing order and not cash.

Open up a savings account and save as much as possible every month. If you do apply for a credit card then make sure that you clear same in full every month by direct debit.