Seen your credit score?

I’ve a confession to make: I’ve been playing on one of the peer-to-peer lending sites. Not mystery shopping or anything, just the sort of thing we should all do when we’re looking for a loan: find out what’s on offer and compare. Ideally we’d be able to check what a loan will cost us in fees and interest, too.

So I went looking for a $20,000 loan, without having any real pressing need. (Take it from me, this is a lot more fun when you’re not desperate for the money. I’ve been there!)

Two things about this experience shocked me. First, when I was approved, the setup fees and interest rate were nowhere to be seen. I actually had to email someone to ask what borrowing 20 grand was going to cost me.

Then, when I finally found out, my second shock was the rate itself: 22.14%! That’s higher than almost all personal loans, car loans, credit cards and even some store cards.

Which brings us to the main point of this post: credit history and credit scores. I began wondering why I was being offered such a high rate, so I ran my credit history to see. Although I had no idea what the lender was looking for in a borrower in terms of credit score, perhaps I could guess why I might not fit the bill.

Now checking your credit history is fairly easy these days, but you have to do it with all three reporting agencies: Centrix, Dun and Bradstreet, Veda. You have a right to get it for free, or you can pay under $10 to get yours a bit faster (within a week or so).

Unfortunately, your credit score – the rating that lenders use to decide whether they will lend to you – is not included with your history unless you pay even more. For your “Vedascore”, for example, you’d have to either pay a one-time fee of $51.95 or start up their alerts for $7.95 a month.

When I ran my credit history, it included the record of my P2P loan application. Too much shopping for credit like this is one of the things that can drive your credit score down.

What else can negatively affect your credit score? Here’s a list:

• Defaulting on a loan
• Not paying after defaulting
• Any insolvency history
• Having too short a credit history
• Not having enough experience with different credit “products” like cards and hire purchase agreements
• Requesting credit too many times from different lenders within a short period
• Living at your present address for too short a time

Since I’ve shifted house a couple of times in the last two years, I suspect that my high P2P rate was due to that last point. Or perhaps it is too short a history, since there’s really not much on it. I’ll never know, since lenders’ credit decisions always have a veil of secrecy about them.

Happily, there are some things we can do to improve our credit rating and get cheaper credit when we need it. Since April 2012 New Zealand has been putting a positive reporting system in place, with the big banks, utility companies and telecoms starting to report our good payment habits over the last two years to the credit agencies.

So the more often we pay our bills on time – and of course avoid defaults or anything negative – the more our credit score will climb.

But all of this still leaves me wondering why I can get my credit history for free, but not my credit score. I still haven’t seen mine.