Credit reporting agencies gather and sell information about individual's credit histories to get a sense of how risky you are in relation to money.
This information can be used by lenders, landlords, insurance companies, opening accounts, and even employers.
Citizen's Advice Bureau's Andrew Hubbard gives advice on checking your credit score, improving and fixing your records, and what causes a bad score.
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What affects your credit score
Often people are caught out by negative scores caused by unexpected reasons, he tells Kathryn Ryan.
“We had a client recently who had been declined because they’d had a late payment on a large medical bill and that was their insurance company who was making the payment on their behalf but it was on their credit record.”
Missing payments to anyone you owe money will negatively affect your score, he says.
“Something that’s particularly useful to be aware of at the moment is with the huge expansion of ‘buy now, pay later’, which often involves multiple small payments over time, missing those will negatively affect your credit records.
“So we’re expecting to see more people being affected by this as more and more people take out ‘buy now, pay later’.”
Defaulting on a due payment (more than 30 days late and over $125) will go on the record for five years, he says.
Even payments delayed by a dispute with service provider or company can end up on the record, he says.
“[For example a] builder didn’t do everything they were required to so you’ve only made a partial payment and maybe you’ve eventually resolved whatever the problem was but they’ve still reported it as a defaulted payment because you never paid the full amount.”
Other factors that will raise red flags include applying for lots of types of credit, shifting your credit back and forth between cards, and loans from third-tier lenders.
How to find out your credit score
There are three companies in New Zealand that can provide credit records and you’ll need to check with each one to see what information they hold on you, Hubbard says.
The companies are required to supply the information to citizens for free.
“So that’s Centrix, illion, and Equifax.
“Easiest thing to do to find out how to apply to those companies to find out what’s on your credit record is to go to the Consumer Protection website or Citizens Advice Bureau website where we’ve got links through to applying for your credit record.”
They usually have an online process where you’re required to sign in and provide ID and then they can email the information or post the information on request, Hubbard says.
“It can take between five and 20 days on average to get that information from them.”
Fixing and improving your score
You can request for any mistakes to be fixed, but you will have to demonstrate proof and that can be a challenge if some time has passed, Hubbard says.
“Then of course, [there are] the challenges that you might have to deal with several different credit reporting companies depending on exactly what’s the problem with your credit record.”
To improve your score, Hubbard advises people to pay off any defaults, make sure payments are on time, limit the number of credit applications and cancel any unused credit cards or accounts.
“I guess the good news about trying to improve your credit score is often lenders in particular will look at your full credit history.
“So even if you have had some defaults in the past, if your last two years is showing a good payment record, that’s likely to be positive, even if your score isn’t as high as you’d like it to be.”
