The idea of the importance of your credit score has been growing in New Zealand. Credit scores are big in the US- and if you are in the US- your credit score seems to be important judging on the many posts about how to improve your credit score.
But- is your credit score important in NZ? or is it just being pushed by the three big credit score agencies?
Does New Zealand have Credit Scores?
There has been a lot of discussions around about whether or not credit scores exist in New Zealand.
Credit scores do exist in New Zealand
In 2012 Comprehensive Credit Reporting (CCR) was introduced- it’s an amendment to the credit reporting privacy code. This amendment allows the credit agencies to use your drives licence to identify you and permit creditors to use your credit report for prescreening.
The CCR amendment was also introduced so that positive credit factors where also included on your credit report. That’s right- before 2012, only negative credit factors could affect your credit score.
Having positive factors and negative factors on your credit report gives creditors a complete picture of your credit situation. Ideally, this means that there should be more competition for your business if you have a good credit record. But more importantly- people had had bad credit might find their credit scores increase due to positive factors that were not included before.
The uptake of credit score reporting
The amendment was introduced in 2012- but the uptake of the CCR has been slow- as of 2018- only 5 of the large banks have joined- they are ASB, Kiwibank and TSB bank (2012), The Co-operative Bank (2017), and ANZ (2018). This represents 20% of banking customers are participating in CCR.
The telecommunications companies were even slower in their uptake of CCR- with Spark and Vodafone only joining in 2017. With Spark and Vodafone now reporting, 71% of New Zealanders will be reported on.
Electricity retailers have also not widely taken up CCR reporting- with only Genisis energy signing up in 2014, and Mercury and Meridian energy in 2015. That represents 52% of electricity retailers are included in CCR
The importance of credit scores in New Zealand
There are several arguments for why the credit score is important in New Zealand. The main argument goes as follows.
Credit scores are useful for distinguishing people who pay their debts from people who don’t
The idea that your credit score is useful to distinguish people who pay debts from those who don’t is one of the arguments for the importance and usefulness of a credit score.
The idea is that if you’ve always paid your debt repayments on time- you will have excellent credit. And the same will happen if you default on your debts- your credit score will suffer.
But in reality- Credit scores in NZ are so inaccurate it’s not funny. And if you haven’t ever had credit- there is no record of your payment history at all.
What do New Zealand credit scores contain?
The score provided by Credit simple is similar to the ones in the US. They give you an overall number between 0 and 1000. A credit score over 700 is said to be very good- and over 500 is good.
The other two companies give you a report of what information they hold about you. They don’t give you an overall score.
So what is in a credit score?
Your credit report obviously contains your personal information- Name, DOB, current and previous addresses- as well as your employment history.
Other information they hold:
- Accounts– such as credit card that provide a facility of credit to you.
- Enquiries– records of any credit enquiries you have made
- Authorised Agent Enquiries– a record of any agents acting on your behalf to assist you in obtaining credit- like a mortgage broker
- Defaults – A record of any credit defaults
- Infringements – a record of any attempts to fraudulently evade any credit repayment
- Collection notices– Any collection notices issues to a collection agency.
- Judgements – Any publically available information sourced from the courts
- Personal Insolvency– for if you have gone bankrupt.
- Other Public Records
I don’t know about you, but none of them seem to be positive factors.
How do I get access to my credit score?
There are three companies in New Zealand that compile your credit history. They are:
- Centrix
- Equifax
- Illion (Credit Simple)
Each of the companies must provide you with a credit report for free if you ask- so don’t be fooled by them, offering you your credit score for $9.95. There is a free option if you scroll down- it just takes longer to get.
The details you will need to provide are your full name, address, email, phone number, and driver’s licence details. They will then send your report to the email address you gave them.
Sure- some people would rather not give up this information- but they already have the majority of the information already- what they don’t have is your email address- and one of the credit score companies if prolific in sending you offers. You should unsubscribe straight away!
Do you need to worry about your credit score?
If you want to get items on finance or want to use after pay services, then yes- you might want to look into your credit score. It’s been suggested that some banks also use credit scores as a part of their mortgage assessment- but it’s not the only thing they look at.
Then again- I have heard some mortgage brokers suggest that bankes don’t care about your credit score at all. They only care if your report says that you have been late on payments or have had any loan defaults.
The problem is that if you don’t use these services- then your credit score won’t be that good. The system is a chicken and egg situations. First, you need to take out credit to improve your credit score, but you need a good credit score to get credit.
Remember- your credit score is not some be all end all number that you have to base your entire life around to improve. In fact- I think you can get by your entire life without looking at your credit score at all.
My Credit Score
So for my interest and possible yours- I decided to have a look as to what the credit agencies have on me. I suspect they don’t hold a lot.
First of- Credit Simple
Credit simple only has one record on me- that goes back to 2018- which is my credit card with ANZ- other than that- there is nothing on my account. This is probably the reason why I have a score of 574. They also don’t have my current address or current employer. So overall nothing interesting here- most of the details are wrong- I’m not going to do anything about that.
Equifax
My credit file from Equifax is 14 years old- wow. I didn’t expect that. Their file contains up to date information; they have my current address, as well as details about every mortgage I’ve ever had. They also have applications for mortgages I have made.
They have details about my credit card, but no sign of any employer details. And for some reason, EVE’s realty inquired into my credit file- which I find strange. Overall, Equifax seems to have a lot of information about me. They give me a score of 893.
Centix
My credit file from Centrix is 8 years old. They have the address of every house I have lived in!
Their report details are vaguer than Equifax, but they do have my credit card and mortgage details on file. As well as my utility supplier- who have enquired about my credit file every time I have renewed my contract with them.
Also interesting is that Harmoney and Lending crowd have made enquiries of “ID verification”. Overall, their details are correct. They give me a score of 850, which is similar to Equifax
To sum up Credit Scores in New Zealand
Honestly- I don’t think you should worry about your credit score at all. We live in New Zealand and not in America. I just found it an interesting exercise to see what information they hold about me, though. Ideally- I’d like them to know nothing about me.
Then again, I might be biased in that my credit scores aren’t too bad. Let me know if your credit score has affected you.
I’m not too fond of one of the credit score companies in particular- as they make you sign up for an online account and actually try to sell you loan offers based on your credit score. They also had the worst credit report, in my opinion- in terms of the sheer amount of details that where wrong. Their score of me was also very different compared to the other two companies.
And finally- Credit agencies are the only ones who benefit from Kiwis caring about their credit scores. So don’t worry about them!
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I think the main place where “positive” credit can be recorded is under the “Accounts” section. For example, we always pay our mortgage and credit card on time, which is reflected in the Accounts section and seems to have a good influence on our credit score.
I can also say from a very short stint as a property manager that if you are renting or expect to be renting at some point, you should care very much about your credit score 🙂
As we’re not renting and don’t have any plans to take out credit (and if we keep saving the way we are, we shouldn’t ever have any need to), I keep an eye on my credit score more as a game or a personal challenge to see how high it will go. As there’s nothing I can do except keep paying my bills on time I have very little ability to influence it but it’s interesting nonetheless. And some of the stuff from Credit Simple where you can see how you compare to the rest of your street or demographic is quite fun.