The Low Down: How to improve your credit score


#1

Even if you have a spotless record of repaying debt, anyone who’s ever applied for a credit card, home loan, phone plan or hire purchase agreement will know the vaguely anxious feeling that stirs in your chest when you hear the words “I’ll just have to run a credit check.”

When a credit provider runs a credit check, they are requesting information that relates to your history of repaying debt to ascertain whether you are likely to repay what they are lending to you.  Often the anxiety you feel stems from a fear of the unknown.  While many of us are aware of the extent to which a credit score can impact on our lives, we may be unaware of how they work and how they are calculated.

There will always be an element of mystery to the way credit scores are calculated (trade secrets!), but thanks to a few BNZ experts we’ve tracked down, we are going to do our best to shed some light on the credit score number that may mean the difference between getting a loan or not.

What is a credit score?

It’s a piece of information that helps lenders when assessing creditworthiness for any type of lending, including business lending.  Creditworthiness takes into consideration whether you’re likely to pay your bills on time or repay the loan in full.

There are many inputs used to determine what your credit score is.  These may include: your payment history, the amount of money you owe, the length of your credit history, the amount you’re looking to borrow, and the other credit you have taken on (for example, credit card, charge card, overdraft, personal loan, equipment rental, mortgage, and utilities).

Credit bureaus operating in New Zealand (Veda, Dun & Bradstreet and Centrix) collect information to determine your credit score and provide this information when a lender requests it.  In order for a lender to request a copy of your credit information your permission must be given; this is provided as part of an agreement to terms and conditions, verbally (over the phone) or through a contract.

Bad score?  Bad news.

We all know that having a poor credit score is a bad thing.  Examples of how this might happen are having late payments on your credit card or loan or failing to meet payments (i.e. defaulting on the loan).  Negative impacts to your credit score may have a resultant impact on your ability to borrow in the future as your credit score will be available to lenders when running a credit check.

If you are in financial difficulty and your debts are no longer manageable, it’s important to contact your lender(s) as soon as possible to inform them of your change in situation and ask for help.  It’s better to be upfront with the facts than to repeatedly miss repayments without explanation.

Redemption is possible!

If you’ve got a bad credit score, don’t lose heart – there are things you can do to improve your score over time.

The first step is to sort out your debts.  If you’ve experienced problems in meeting your loan repayment requirements, seek to get back into a regular payment cycle.  Repayment history allows you to demonstrate that you have rehabilitated your credit behaviour by showing a clear record of repayment over a period of time. Just remember, significant negative events like defaults can impact you for up to 5 years.

Over time, a past credit problem can become less relevant to your credit score as recent payment patterns become more relevant.  Defaults will still impact negatively on your score for up to 5 years, but their impact will get smaller on demonstration of a subsequent uplift in behaviour.

It’s important to remember that credit providers aren’t just banks.  Telecommunications or utilities companies are also credit providers… so this means you need to ensure all your bills are paid on time.

Get it right, keep it tight

It’s important to be aware of any negative data you have on your credit report so you can seek to address it accordingly and put a plan in place to mitigate its impacts in the future.  If you’re unsure what your credit score is or what’s on your report, you can contact a credit bureau and request your personal information.  You can check that the information is accurate, and that no one else has used your identity to obtain credit.

So that’s it, the low down on credit scores.  If you’ve got a sinking feeling that your score may not be so great, just remember that you can always make a comeback.  Like Rocky.  It’s never too late to start.  The first step is to assess your situation and make a commitment to getting your finances in order.

Need a helping hand? Ask questions and get answers in BNZ Community. Or come in for a chat with one of our banking advisors.

To request a copy of your credit report contact:
Veda - mycreditfile.co.nz
Dun & Bradstreet - checkyourcredit.co.nz
Centrix - centrix.co.nz


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#2

Don’t forget when you are requesting your score that you are entitled to a free copy of your score. Although it may take a little longer to get the information and the free option can be harder to find on some websites than others.


#3

Highly insightful article - well worth a read.


#4

It’s better to know that not, whether you think you’ve got a bad score or a good one. The unknown is what will trip you up, and when you’re applying for a loan - especially if you’re starting up a business or buying a house - the less hurdles you have to jump, the better.


#5

Hi! I’ve got a pretty bad credit score and I thought I wouldn’t take loans anymore. I got a new job recently that’s paying me well.  The nature of my job is such that I have to shuttle between places. I need a car. Thinking of taking  a loan. I read that I can take a  bad credit loan which can help me get a car loan. Has anyone taken a bad credit car loan?


#6

There are lenders who lend against secutity and charge bit higher interest rate. Since you are buying Car so you can offer that as security so bad credit is not the end of the world. 


#7

In 2013 my credit score was 660 two years later its now below 400.

So what changed - I have two non-payment disputed defaults listed against it. One amount is for around $8000.00 and the other $790.00 listed by the same bank at the same time. Lost nearly half the score.

I wonder what my score would look like if I had a court judgement or bankruptcy against it.

Credit scores can go into the negative.


#8

I too have a bad rating due to something in the past being out of my control. For the past twelve months I have worked really hard at making sure everything is paid on time and apart from the odd slight hiccup, I believe I have made huge leaps in improving my record.

But without actually requesting a Credit rating (and knowing it will actually drop due to my request) Is there any other way of finding out whether it has improved without actually requesting one?


#9

Hey @munderwood , as I understand it credit providers look at both the score and the record - the score costs money to find out and also the request itself impacts on it, but the record is free (unless you need it urgently) and that request won’t impact the score.

I actually requested mine from Veda a few months ago just out of interest - it doesn’t include my actual credit score but I can see what they’ve got listed and get the gist of whether it’s likely to be good, bad or in between. Will probably look at approaching the other two when I get around to it because a person at Veda said that the records will probably vary due to companies sending information to one or the other rather than all 3 bureaus.

Maybe you could request copies of your record and then at least you’ll know what credit providers are seeing when/if they do checks. Not an exact science, but it’s something at least!


#10

Hi @munderwood.

The credit score is not the major issue. I doubt even the people asessing a loan application understand it. The elephant in the room is the “adverse” information. Based on what I can gather about credit scoring - paying on time has little effect unless someone has lots of monthly bills to major companies. The vast majority of companies in New Zealand do not report to Veda so your effort, although it’s the right thing to do, is probably more beneficial for your realationship with these businesses then anything else.

Michael


#11

Veda claims to have a substantial share of the market. I don’t know how many companies use Veda. Yes not all companies or banks use Veda as a credit reporter.

To request a copy of your own credit report you do not lose any points. To actually get your credit score you have to pay $51.95 for it.  Your score becomes a major issue if Veda’s internal processes are flawed. In my case my credit file aged three years in a matter of a couple of months. It looked like I had lost nearly 70 points from opening a bank account. Veda will not fix the error or return the points lost or reveal what historical data they found. Scoring is an issue if you have adverse data against it. If you have errors on it made by other creditors, scoring is an issue. Also if you close any account creditors won’t update your history either. Having spoken to two bank managers I can tell you that they are very aware of credit scoring and how they use it. If you make payments on time your report will tell you but you do not gain any positive points. Yes the information credit reporters hold against you will most likely vary between each reporter. In my case the same default had been listed with two credit reporters for different amounts entirely and they also showed a different creditor, suggesting the debt had been sold along the way.

My beef is consumers don’t have any right to know up front how any activity is going to affect their credit score. Points are deducted from opening bank accounts and utilities if the companies subscribe to Veda’s service. Centrix has a slider graph. One default will cause the slider to go into the red zone.

The only ways to improve the actual score is when entries fall off it after 5 years. Or errors are corrected or removed or listed as disputed.

Creditors list entries against your credit report. They are careless and can make substantial errors. To my shock I found that the credit card I had opened with GEM Visa had been listed as 40000.00 instead of 4000.00. It was eventually corrected but had I not found out, to another creditor that error looks legit. Credit reporting itself is probably necessary but scoring isn’t, and there is no need to list adversley the items that are not negative, that which restrict customers movements like opening multiple bank accounts. That takes away the right of freedom of choice.

I wish I had known about credit scoring and reporting before my report got ruined. Maybe my spending might have been different. Too late now. Sure there may be some redemption but a damaged credit report is for life.


#14

Basically, you are a moron and full of ■■■■, as the judgement clearly infers and I quote from the conclusion:

“[19] None of the grounds advanced by Ms Cowe constitutes a substantial ground on which to set aside the bankruptcy notice.”

If you had acted pursuant to the advice I wasted a lot of time earlier this year giving you via email and in this forum, I expect you would have been close to being free of the monkey on your back by now. Instead, it’s just dragging on and on and you are getting deeper.

Furthermore, you are a double idiot commenting publicly while involved in a legal process - especially on the forum owned and controlled by the bankruptcy Applicant.

There are 4 ways out of credit card debt:

  1. Pay it off
  2. Enter into a settlement with the creditor
  3. Insolvency (No Asset Procedure, Summary Installment Order or Bankruptcy)
  4. Death - note the creditor can make a claim on your estate if you do not have repayment insurance but I suspect in the case of a small balance outstanding they would write it off.

That’s all the options.

If you had something to offer I would have suggested trying number 2, though it is now apparent according to the court judgement, the bank offered this to you. This is a normal path of the course for banks wanting to get something back on unsecured distressed and doubtful debt.

However, it was apparent earlier this year you were not in a financial position to realistically pursue this path. On this account, I strongly suggested you initiate option 3 so you can have some control over the outcome. Clearly, No Asset Procedure is often preferable to Bankruptcy, however, the debtor has to take the lead here. If it goes to court bankruptcy is the inevitable outcome.


#16

Your incessant and delusional rambling is likely why you didn’t get a favorable result with the bank.

Ideally they want all their money back but in your case I am pretty sure they previously would have cut their losses and settled for what they could get.

Your arguments count for naught legally, just as I told you earlier this year.

Credit cards are the work of the Devil, forged in the fires of hell. If someone treats them accordingly they will find them useful. I have both a BNZ Advantage Visa Business and a personal BNZ Low Rate Mastercard. Both have zero balances coming into Christmas. The cash back rewards I earn on the BNZ Advantage Visa Business more then cover all the fees myself and my small business pay the bank each year.

I have been in the crap financially in the past and spent 5 years in the credit sin bin as a result. Contrary to what you claim, redemption is possible. The issue here is you are going the long and difficult way about it.

There is nothing myself or anyone else can do to help you because you just damn well won’t listen and learn. You insist on traveling the path and finding out this stuff for yourself.


#18

Great, so you found out like many others do too. FFS, now, when are you going to declare insolvency and get it over and done with?

If you had taken the advice of your accountant friend a year ago (advice which I concurred with earlier this year) you would have been almost finished by now. Instead you dragging out the inevitable and making further public records in the process.

I’m tired of your crusade because myself and others have spent a lot of time imparting to you the rules of the game and yet you insist on finding them all out for yourself. This is fine if this is the path you wish but what is your purpose here?


#20

Everything I see you writing on this subject is a load of delusional self-absorbed BS.

This is how debt collection works in the real world:

Auckland -

When you dont pay we take action - Youtube

or overseas…

UK’s Scariest Debt Collector (Full Length)


#22

No one gives a ■■■■ about your crusade @Fordette

You are full of rhetoric. Either pay your damn bills or plead bankruptcy. But coming here and trying to make a scene is just proving you can’t be trusted.

I’m not sure if you are incredibly arrogant or very foolish but waving a red flag at the BNZ (Your biggest creditor) was not a smart move.

While you are mildly entertaining at times, I think your contribution overall here is a waste of space and quite frankly I would not miss seeing you get removed again, as your previous aliases have been.

I have been in the ■■■■ in the past and told you everything you need to know. Additionally, you have been helped by others in the other forum and by your accountant friend. You have clearly not paid heed to a word anyone has said.

One thing is pretty universal in this world and that’s people who default on their debts and make a scene about it are universally derided in society. At minimum, you are making your path back a lot harder on yourself.

Do you have no sense of reality? You have painted yourself into a corner. If the bank might have been prepared to cut you some slack - because clearly they won’t get their money back with you - you have made sure they will take the tough route… which you will lose I add.


#24

That is semantics. In any case - they are the ones who are going to tip you over.


#25

Your alleged “settlement offers” clearly aren’t worth ■■■■. What the hell makes you think the bank wants a shareholding in your tinpot insolvent company? The more you preach here, the more delusional you sound. Get a grip or failing that… just go away.

The reason the bank doesn’t want to engage with you is clear - having lost money on you, you have the cheek to expect them to further indulge your bizarre crusade.

The judgement of the court was clear and that’s you are way of of touch with how the world operates.


#28

So what? Plenty of other people borrow 10’s of thousands of dollars and then don’t pay it back.

Yesterday Vodafone offered me a Samsung S7 for around $1,200 - paid off over 24 months. I baulked at the idea of spending so much on a phone and instead went a bought a Samsung S6 on clearance special - still a high end phone - for $599 and paid for it outright.

I’m going overseas in a few weeks - I have fully paid for my trip and incidental expenses.

Mostly it’s just choices.

Debt per-se is not always bad but some people end up in the hock for 5-figures of crap. I know this because as a Harmoney lender account holder I see the morons who lived the life of Riley and now want to borrow others money to bail themselves out (which of course I don’t do).

I suggest you look at the case of E-Trans v Kiwibank and consider, morally speaking, they had a far better claim then yours and they lost.

Your understanding of the nature of retail banking is clearly deficient.

The bank’s retail aim is to make a profit through:

  1. Selling the use of money (interest)
  2. Selling transaction services - ie: bank accounts, foreign exchange, merchant services
  3. Other areas - insurance, consultancy

Where does your “business” fit into the above? Clearly it doesn’t else you would be onside with them.

They made a bad lending choice with you and they will lose - that is clear. You screwed up and you lose too. That’s pretty much where it is at.

Historically, myself and my small business have not been worth much to the bank. My business incurred account fees of under $100 per year and I only switched my personal banking to the BNZ about a year ago.

In the last year the bank has started providing my business with merchant services and given me 2 credit cards with limits substantially higher then I asked for. I pondered over this and it quickly occurred to me - They are not setting credit limits based on people’s ability to fully repay every month - they are setting credit limits based on people’s ability to pay the interest and their perceived risk profile - ie: the likelyhood the bank will get paid the interest. In my case, I’d think the numbers for that are acceptable and I have a clear credit check so the lending was granted.

Of course, I am not foolish enough to go on a credit-fueled spending splurge and as a result both cards are sitting at low balances and not incurring any interest because I keep making payments for what I have spent.

From what I have seen of your increasingly nonsensical claims, it appears to me you believe the bank has a duty of care to protect you from yourself. I suggest you are dreaming if you think that’s the case.

In summary, the onus is on the borrower to make appropriate choices, hence the question the bank asks in their lending application now “are you sure [this lending] is right for you”?


#30

I suggest you reconsider professing to speak for others and stick to speaking for yourself.

Why do I say this? Many times I have seen people, who being in a position where they know (or ought to have known) it was stupid, insist on acquiring more debt, even if they are outright told this by well meaning people. Look at various Facebook “local groups” around Christmas time.

I am sure you will find plenty of the idiot class ready to support your crusade but you will quickly realise how futile it is.