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: CentrixDun and BradstreetVeda. 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. 

 

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Comments (9)

  • Ford

    6:27pm | 23 Jan 2018

    Your credit score contains the most value that is why its not free. If you have a formal insolvency procedure against you no score is displayed. So the amount of the score will still alert a lender what sort of financial history you have. Lenders really only care that you will keep paying them forever. I've spent hundreds of dollars with Veda over the years requesting my credit report at various points overtime. I can tell you that opening a bank account will set you back about 35-40 points. If you get a credit card with a bank you will actually gain about 7-8 points. Using third tier lenders will put a bigger hit on your credit score. Once entries drop off after 5 years you never gain back all the points that were lost initially. Comprehensive reporting doesn't increase your score (in my experiment it didn't). Two bank managers have told me that the purpose of a credit report aside from the score is to see what defaults are listed. Some banks also have a threshold and won't accept customers with a score below certain threshholds. Credit reporting and scoring is also for the investors who invest in financial products. One reason the stock market crashed in 2006 & 2007 is because lending was given to people who had poor credit ratings, and when markets changed and interest increased, they defaulted. Forget the paid for monitoring. Just go and get a police report for free (which I mentioned in a previous post). and put a suppression on your credit file. Complex algorithms make up credit scores, that which are not disclosed to the public and cannot be disputed. But yet they have the power to control lives. Credit reporting just one piece of a massive debt collection industry. I would give my life not to have a credit history. Veda claims your credit report is an asset. That is the biggest piece of BS. The asset belongs to the lender, and the credit reporters who now have your life's history to sell to their subscribers.
    "Who is the more foolish, the fool or the fool who follows it?" Obe Won-Kanobe.Star Wars.

  • Ford

    6:01pm | 23 Jan 2018

    Lenders actually get your lending history and credit score for just $22.00. Last year I paid a small lender for them to get me the report. Of course it ended up with an entry against me. But it was worth it. My credit report has been artificially altered by Veda and the age of the credit report has increased by two years. ANZ and Baycorp have both listed the same debt. This is against the Rules of the Aussie Debt Collection rules, but nothing our government can do about it. They do that in order to bring down the credit score. People don't realise that our credit reports do actually dictate the direction of our lives. For example if you want to buy a house and you get refused credit because your credit score is too low, you might have to make alterative arrangements and end up living in another suburb for example, so the course of your life is changed by the credit reporters and lenders.

  • Ford

    5:42pm | 23 Jan 2018

    "...discharged bankrupts are treated like 'criminals' for years after their discharge....virtually a life-long sentence....are refused any borrowing and if it is approved 'massive' interest rates/costs....Bloody rip off!!! what happened to Human Rights...????"
    They get taken away along with your legal and privacy rights also. That is why I am campaigning to change our laws. Bankrupts are treated like criminals. My experience is that it is the government and the lenders that sets the standard for that stigma. They do that in many ways. One way is by not regulating the debt collection and credit reporting industries. They publish for life, formal insolvency procedures through the NZ Gazette and the High Court. So that branding stays with a person for the rest of their life and beyond. If you are bankrupt you also get a new IRD number which you will have to give your employer. Once branded an insolvent, there is no clean slate, ever. You cannot apply for legal aid and if you are self represented you will not be allowed to present any defence. Insolvency law actually reveals a lot of truth how our government actually runs the country and the true purpose of insolvency laws are revealed.

  • Smithd109

    9:58am | 5 Sep 2017

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  • Tom

    3:42pm | 2 Mar 2016

    Hi there #4, thanks for commenting. At present, privacy law ensures that our credit histories are freely available to us, but not the scores that are derived from them. A credit score doesn't currently qualify as personal information because it is a separate entity from a person's credit record. Perhaps this will be reviewed in the future as these scores become more and more our "identities" as far as credit goes.

  • anonymous

    3:42pm | 2 Mar 2016

    Under Law (the privacy act) we are entitled to view any records that are held (by anyone) about us and our personal details for free and unobstructed so, how is it that we have to pay and are unable to see our credit score?

  • anonymous

    3:42pm | 2 Mar 2016

    My nephew went and changed his name by deed poll because his financial and criminal history was out the gate. It worked, he is able to work after getting out of jail and he is building his credit rating which is a lot easier than being a discharged bankrupt.

  • anonymous

    3:41pm | 2 Mar 2016

    ...discharged bankrupts are treated like 'criminals' for years after their discharge....virtually a life-long sentence....are refused any borrowing and if it is approved 'massive' interest rates/costs....Bloody rip off!!! what happened to Human Rights...????

  • anonymous

    3:41pm | 2 Mar 2016

    I had an Non-Asset procedure back in 2008 and it was suppose to be only for a year then removed. I've still got it on my credit history after all these years - and it was only stressed to me it was only for a year. I don't have any results myself to what my number is.