Your credit rating matters

credit score-929Your credit rating – whether you realise it or not – matters!

Most adults have a credit history, even if they’ve never taken on any debt. A credit report covers off your history of bill payments and use of credit, as well as any defaults or court judgements. And businesses, employers, and landlords may do a credit check on you when deciding whether to offer you credit, a job, or a tenancy.

You’re probably wondering, how do I check my credit report?

There are three credit reporting bureaus and you are entitled to get a free copy of your credit report from each of them.

Dun and Bradstreet: https://www.checkyourcredit.co.nz 
Centrix: https://www.centrix.co.nz/Personal/Get+my+credit+report.html
Veda: https://www.mycreditfile.co.nz/products/my-credit-file

Once you receive your credit file, look it over carefully and if there are any errors, ask for them to be fixed. Identity fraud is on the rise and if you see inquiries, accounts or defaults on your credit report that you didn’t know about, you may have been the subject of identity theft.

Your credit report contains your personal details (name, address, birthdate etc.), details of any credit inquiries, as well as any recorded negative or positive data.

When a third party checks your credit it will show up as an inquiry on your credit record, so think twice before letting anyone run a credit check on you - too many of these on a credit file can look bad to lenders.

Negative information includes details such as court judgements or payment defaults. A default is a missed payment that has been overdue for more than 30 days where the lender has tried to recover the money owed. Even when paid in full, a default can stay on your credit report for five years!

Positive information (which credit agencies were allowed to start collecting from 2012) can include details of your regular repayments – e.g. mortgage, credit card, hire purchase or loans. Your credit report may show what types of credit you currently have, the credit limit, and the name of the lender.

The move to positive credit reporting means that keeping up-to-date with payments can count for something!

What is a credit score?

Your credit score relates to your credit history. Essentially, your credit score is a number between 0 and 1,000 that estimates your ability to keep up with bills. Scores are not part of your free credit report – they’re only included if you pay for a full credit report (that said, you can now check your credit score online for free at Credit Simple, which is owned by Dun & Bradstreet).

What’s a ‘good’ credit score? Well, the higher the score, the better – it means you’re seen as low risk by lenders. Between 500-600 is the norm and scores in the 700+ range would be considered above average. Keep in mind that this number isn’t fixed and your credit rating can change over time. Also, your score can vary between different credit agencies.

A number of factors can affect your credit score. These might include how often you’ve moved house and how short your credit history is, along with payment history, defaults, number of credit inquiries, etc.

Why having a good credit rating is important

Lenders typically do a credit check when you apply for credit – that might be opening a new account with a bank, finance company, or even a phone or power provider. If you’ve got a clean repayment history there won’t be any issues there, but a bad credit rating can make it hard to get approved for finance or result in a lender charging you a higher interest rate.

A potential landlord or insurer may also want to check your credit history. Some employers also run credit checks on job applicants!

So while you may not give much thought to your credit rating from day-to-day, it does pay to keep your record clean. Making payments on time is the best way to do that.