First Person: How Having And Knowing My Credit Score Helps Me Live A Better Life

“I work in a bank, so I’m expected to have a clean record. That can affect my employment in the industry I’m in,” shares Noel*, who has been working in one of the biggest banks in the country for close to five years now.

According to Noel, to keep going up the ranks, a bank employee must have a good credit score. Banks call each other up to report delinquent card owners or bad-credit employees, and their chances of promotion are slim to nothing until they have actually settled all their debt.

Since a good credit score is essential for his career mobility, he takes great pain to know his credit score, improve it, and maintain it. Here, he also shares with us some additional perks of a good credit score.

The 5Cs of credit

“You’ll never [really] know your credit score if it’s bank-related, as each bank keeps it confidential. It’s more of a self-judgment based on the 5Cs of credit,” shares Noel.

We asked him what he meant by 5Cs and he was happy to elaborate.

“Capacity is self-explanatory,” he starts. “It’s one’s gross annual income, and the capacity to pay back the debt. This is why banks set a minimum income requirement and tenure.”

“Collateral is when someone offers a Bel-Air property, and people would buy it if it was foreclosed versus a house in a squatter’s area. No one would finance that. It could also involve legal impediments, like people are fighting over the title,” he adds.

“Character is your payment history,” Noel continued. “Do you have lots of late payments, or had a delinquent card or loan? Most likely, you have already been reported to these banks’ networks. This will make other banks avoid you, especially if the problem came from you and not the creditor.”

“Conditions are internal or external factors that we have no control over. Economic, war zones, etc. Example, during the Qatar [diplomatic crisis], a lot of banks weren’t lending to OFWs based in Qatar due to the trade embargoes,” he explains. “Is it the OFW’s fault for working there? No. Of course not, but a lot of banks aren’t willing to take the risk because they are highly likely to lose their jobs.”

“With Capital , this is usually how much money you’ve put out for the loan. For example, someone who shelled out only 10% is more likely to give up the collateral if something went bad, versus someone who paid 50%. This could mean that the latter has more spending power and is more financially stable than the former,” he notes.

(Read: An Easy Guide To Understanding Credit Scoring In The Philippines)

So given all this financial knowledge and good credit score, how does one make it work to their advantage?

Asked if he is planning to make a big loan in the future, Noel lays out an explanation first. “First, I’ll check my capacity. A lot of banks compute based on 30% of your monthly gross income. So, if my salary is P55,000, my monthly amortization should not exceed P16,500. Also, some banks have a minimum required income of P30,000 or P40,000 monthly. And let’s face it, you still have to eat, right?”

“That’s not for all banks, but you get the point,” he continues. “Some people think they can afford to apply for a loan, but once you start analyzing it, turns out, you can’t.”

“I haven’t bothered going for a loan, but given my record, if I go for a P1 million personal loan at let’s say, 15 years for a property, I’d probably get approved with minimal fuss or questions. That’s because they will never find negative files on me.”

(Read: The Philippines Has Credit Scoring – What Does This Mean For You?)

Hard-learned lessons

Think you can’t be as financially responsible as Noel? Think again. You don’t have to always have been financially responsible; it’s actually something you can learn. Noel himself said he started to be more careful with not incurring debt and managing his finances in 2014 after a bad experience.

“It was a learned lesson when my own kuya (older brother) had to bail me out of my credit card problems once before. It wasn’t really bad credit, the amount was just getting larger to manage, that all I can pay was the interest. That was when my salary was P15,000, as compared to P55,000 now,” he recalls.

“I promised myself, I’d never let that happen ever again. Plus, I work in a bank, I see too many people with bad records get disapproved.”

So now, Noel makes sure to compute is monthly fixed and estimated expenses and never go over budget or spend more than his disposable income.

Noel currently has two credit cards. He is proud to say that now, he has never defaulted from payments on both the cards and even when he has taken out a loan.

“I once had a personal loan of P100,000 with [bank name withheld] but I paid that off in advance because I don’t want to pay more due to piling interest, he shares. “There was an advanced payment fee, sure, but it’s still cheaper than paying the interest monthly. So, my ‘Character’ is clean as a whistle.”

Noel says he is at peace with the fact that he can apply for a loan or a credit card anytime the need comes up, given his good credit score.