Young professionals urged to start building credit history

MANILA, Philippines – Young professionals have been urged to start building their credit history as the country prepares to have a fully-operational integrated credit bureau soon.

Credit Information Corp. president Jaime Garchitorena said it is important for the youth to start being conscious of their credit usage to benefit them in the future.

“The earlier you start building your credit score or credit history, the better for you,” Garchitorena said as the CIC plans to launch a credit score database by 2017.

Currently, the CIC is still building a centralized credit information system. Garchitorena earlier said the CIC should have at least five credit bureaus under its wing working on and expanding databases dealing with the credit activities of individuals, groups, and corporations by December.

The CIC plans to draw data from utility firms, telcos, state-pension funds, and other government agencies aside from financial institutions to help create this registry.

Since having a “good” credit history would help individuals take out loans for business ventures, properties, or vehicles in the future, Garchitorena said the public, especially those in their 20s and 30s, should make sure all their credit behavior should be attributed to them.

For one, individuals should get a postpaid line as soon as they can and make that their starting point for building a credit history.

“The only excuse people use to not get a postpaid line is they don’t want to exceed their limit but telcos have responded to this already… so you can easily cut-off at say, the P400 that you can afford to pay,” Garchitorena explained.

Another consideration for young professionals should be the electricity and water bills they are paying especially if they are renting an apartment or a house.

“Chances are, the [electric or water] meters are in the name of the owner… so you’re wasting all that good credit behavior because it’s in the name of somebody else,” Garchitorena stressed.

He also noted parents should also consider transferring the name registered with water and electric companies to their children so the latter could have his or her own credit history.

“Now you have to make sure that all the good credit behavior data that you can gather is now attributed to you,” Garchitorena said.

At present, the CIC has “very limited” information on the credit behavior of individuals and businesses, and none of these data are connected.

However, Garchitorena is confident that the CIC will be able to gather records easily and be able to launch credit scores in 2017 as the agency has already started extracting information from various databases.

The government owns 60 percent of the CIC, while the remaining 40 percent is held by the Bankers Association of the Philippines, Chamber of Thrift Banks, Rural Bankers Association of the Philippines, Philippine Cooperatives Center, and the Credit Card Association of the Philippines.

It was created in 2008 to establish a central system for credit information partly to ease the access of individuals and corporations for loans.

Read more on The Philippine Star.

source: www.abs-cbnnews.com

How a former 'credit card-aholic' got out of debt

MANILA – When a bank offers you a credit card with a P200,000 credit limit, annual fees free for life, and only proof of employment as requirement, will you accept it?

For then-office employee Aldwin Tanjutco, who admitted that his salary wasn’t enough to buy the things he wanted, the decision was easy.

“I felt empowered because I’ll be able to buy already the things that I want to buy even without earning money first. It gave me the illusion of cash, cash that I don’t even have — unlimited cash. With the card, I just spend and spend and spend,” he told ANC’s “On The Money.”

Tanjutco said he had second thoughts on using his credit card for purchasing items, but he gave in to the temptation to spend.

The high credit limit, unfortunately, became a spending target for Tanjutco.

“I thought about it, but the temptation of spending overcame the intention on how I’m going to pay for it,” he said.

In just five months, Tanjutco maxed out his credit card and found himself in huge debt. He also started to incur a large amount of interest because he wasn’t able to pay his monthly dues.

“I am spending more than I’m earning, so I wasn’t able to pay it in full, in fact I was only paying the minimum. Sometimes, even below the minimum. So you can imagine just how much interest they are charging,” he said.

He began paying off a chunk of his debts with mid-year and Christmas bonuses, and when he felt that he could handle his debt, he asked the bank to increase his credit limit.

His credit limit was increased to P230,000, which for Tanjutco, meant he could spend more.

When Tanjutco again found himself struggling to pay off his monthly bill, collecting agents began calling him, which made him realize the serious situation he put himself in.

Tanjutco said he was given a 25 percent discount to make it easier for him to pay off his debt in a 12-month period.

He learned that credit cards can be your friends, if you know how to use your credit wisely.

The next time Tanjutco applied for a credit card, however, he was denied because of his bad credit.

To clear his bad record, he sought the help of the Financial Consumer Affairs Group of the Bangko Sentral ng Pilipinas (BSP).

“I felt relieved because finally there was hope that I can clear my bad record in terms of credit score. After a day of two, a BSP director emailed me and forwarded my letter to the concerned bank,” Tanjutco said.

“I realized that I shouldn’t spend what I couldn’t pay for. I should spend below my means. If I have debts, 20 percent of what I earn, I just maintain it at that level so that I can manage it,” he added.

Tanjutco, who is now a business owner, admits that he still has debt, but now he knows how to manage it well.

“I felt empowered. I cannot say that I am 100 percent financially free, but I feel that I am moving towards what my goal is,” he said.

Abraham Co, board member at Credit Information Corp., advised consumers that being aware that there is consequence to how you behave financially, will change behavior.

“If you think that there is no consequence and you can get away with this, then you will continue your bad habits. But if you value your future, and know that there would be consequence, then that will change behavior,” he told "On The Money."

Credit Information Corp. board member Suzanne Felix, meanwhile, said credit card owners should be more responsible in their spending to protect their credit record.

“It’s about time as borrowers that we develop that sense of responsibility. The banks are doing their part, so the borrowers should also be doing their part,” she said.

source: www.abs-cbnnews.com