Credit reports, Credit History & Credit Scores – How credit history and scores work
Credit reports, Credit History & Credit Scores – We’re getting identified more and more by our credit reports these days. When businesses decide whether to lend us money, for example, they look at your credit report and give it a score. Any past missed bills or mortgage repayments have a negative impact on our credit score and affect our ability to borrow or get credit. By understanding how credit ratings work and keeping an eye on ours, we can keep things sparkling and get the best borrowing terms and rates.
Who checks my credit history?
Lenders usually check our credit history whenever we apply for credit – whether it’s a mortgage, a personal loan, hire purchase, car finance, or a new credit card. Phone and power companies may also check our credit rating if we apply for those services on credit. A prospective landlord or insurer might check our credit history. Some employers even make credit checks if we apply for a job.
They do this by making an enquiry to a credit reporter – an organisation that collects credit information and sells reports on an individual’s credit history to businesses.
Something to keep in mind is that having lots of checks run on your credit history can make it look like we’re taking on a lot of debt. For example, say we’re shopping around for a car. We visit five dealers, who all take our licence and do a credit check. Having so many credit checks done in a short period of time can lead to lenders turning us down.
What’s on my credit report?
What are credit reports? A credit report includes any payment defaults recorded against our name. A default is where a payment has been overdue for more than 30 days, and the lender has taken steps to recover the outstanding amount.
A default can stay on your credit record for five years, even after we have paid the amount in full.
A credit file can also show how much we’ve borrowed and whether we are making regular repayments (such as credit card, hire purchase, car finance and mortgage repayments) on time. Our payment of power and phone bills may also be included in our file. So the more repayments we make on time, the cleaner your credit report is.
Who holds my credit details?
The following credit reporters operate in New Zealand:
Equifax
Dun and Bradstreet
Centrix
To correct or freeze information on a credit report, make sure to contact all three.
How do I check my credit rating?
We have a legal right to request information held about us by a credit reporter – at no cost.
It’s a good idea to regularly check your credit report, especially if you’re thinking about borrowing in the near future.
If we want the information quickly (within five working days) we may be required to pay a fee, but otherwise, it’s free to check our credit rating.
To order a credit report, contact the credit reporters directly at the links above. Selecting the regular application option will take longer than an express service but there’s no charge.
For a fee, some credit reporters, such as
Equifax, will load a monitor on our credit file to alert us to applications for credit made using our identity.
Find out more about rights on the
Privacy Commissioner’s website.
Correcting wrong information
Spotted a mistake? Ask the credit reporter to correct it and they will sort it out.
Keeping a clean credit record
It’s important to make sure the credit information held in our name is correct, and to keep our record clean.
Bill repayments
The more repayments we make on time, the cleaner your credit report will be.
If we’re considering being a guarantor on someone else’s loan, our own credit rating could be affected if they miss payments.
Unpaid Fines
Unpaid court fines or unpaid reparations are not recorded on a credit report, but they may be included when a credit check is done. So unpaid fines may affect our ability to get credit. Find out more at the website
fines.govt.nz.
Trouble paying debts?
If it gets hard to keep up with debt repayments, there are just two rules to remember:
Try not to miss a repayment
Let the lender know as soon as possible. They may be able to work out a new repayment plan.
Before things get too serious – debt management advice is available from financial capability services. Visit the
Family Services Directory to find financial mentoring (budgeting) and MoneyMates (peer-led workshops) services near you.
If the repayments are for goods bought on hire purchase or using a credit sales agreement, find out about more options on the Consumer Protection website.
More serious trouble
When debts are seriously keeping us up at night, options include:
Applying for a Summary Instalment Order which allows us to repay debts in regular instalments without the threat of legal action (provided the unsecured debts total less than $40,000).
Applying for a No Asset Procedure (NAP) if we have no means of repaying any amount towards our debts.
Or, as an absolute last resort, there may be the option of filing for bankruptcy.
For more information, visit the
Insolvency and Trustee Service website.
The
Consumer site also has helpful information.
Identity fraud
Identity theft occurs when someone applies for credit using another person’s name and then deliberately defaults on payments.
Here’s what to do if that happens:
Ask all the credit reporters to freeze (suppress) the credit report until the risk has passed
Notify the police
For more information about identity theft, see:
New Zealand Police website for information on
Department of Internal Affairs
identity theft website for examples and a checklist to use in case of suspected identity compromise
For further information on Credit reports, Credit History & Credit Scores, please contact
Oliver Broomfield Mortgage Broker.
