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 our 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.
Lenders usually check your credit history whenever you 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 your credit rating if you apply for those services on credit. A prospective landlord or insurer might check your credit history. Some employers even make credit checks on job applicants.
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 you’re taking on a lot of debt. For example, say you’re shopping around for a car. You visit five dealers, who all take your licence and do a credit check. Having so many credit checks done in a short period of time can lead to lenders turning you down.
What are credit reports? A credit report includes any payment defaults recorded against your 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 you have paid the amount in full.
A credit file can also show how much you’ve borrowed and whether you are making regular repayments (such as credit card, hire purchase, car finance and mortgage repayments) on time. Payment of power and phone bills may also be included in your file. So the more repayments you make on time, the cleaner your credit report is.
Everyone has a legal right to request information held about us by a credit reporter – at no cost.
If you want the information quickly (within five working days) you may be required to pay a fee, but otherwise it’s free to check your 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 your credit file to alert you to applications for credit made using your identity.
Find out more about rights on the Privacy Commissioner's website.
Spotted a mistake? Ask the credit reporter to correct it and they will sort it out.
It’s important to make sure the credit information held in your name is correct, and to keep your record clean.
The more repayments you make on time, the cleaner your credit report will be.
If you’re considering being a guarantor on someone else’s loan, your own credit rating could be affected if they miss payments.
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 your ability to get credit. Find out more at the website fines.govt.nz.
If it gets hard to keep up with debt repayments, there are just two rules to remember:
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.
When debts get more serious, options include:
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 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:
For more information about identity theft, see:
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