Find out your credit score – and what you can do about it.

Whenever you apply for a home loan, credit card, HP or any other form of credit, the lender will run some checks. Because if someone’s advancing you money, they’ll want to know if you can pay them back.

But as always with money, there are a few myths out there.

For instance, I’ve had clients tell me their credit score is A+ or that they have a “minimal credit record.” Spoiler alert – there’s no such thing.

Other borrowers do naive things like ‘shopping around’ for loans by making lots of applications. I’ll tell you why this is a bad idea.

Here’s the Sue Tierney Mortgages guide to credit checks and credit scores:

What is a credit check?

In New Zealand there are independent credit reference agencies that maintain databases of credit applications and missed payments. The main ones are Centrix, Equifax and Ilion.

When you apply for credit, the lender will order a credit report from one of these companies. What they see in your file will affect whether they accept your application, as well as the terms they offer.

Different lenders use different credit reference agencies. So the information supplied to one lender might differ from the information another lender gets. 

Fortunately it’s easy to find out what information they have on you.

Here's how to get your free credit report.

Equifax offers a free credit report within 10 working days, or you can pay extra to get a fast-track report in three working days. Apply for your Equifax report here. 

Ilion offers a free report in 10-20 working days or a fast-track report in three working days. Apply for your Ilion report here. 

Centrix offers a free credit report in five to 10 days. Apply for your Centrix report here.

We suggest you apply for all three reports. It’s always useful to see the information these companies are holding, and compare what they have on you.

Tip: If you’re thinking about getting a mortgage or any other type of loan, we suggest you obtain credit reports well in advance. This will buy you time if you need to correct the record.

How do credit scores work in New Zealand?

Credit reports contain both positive and negative information. So if you’ve taken out a loan in the past, and paid it back in full and on time, these facts will be on your record. Your track record with utilities and phone companies will be there too. 

The other side of the coin is that any missed payments, late payments, defaults or bankruptcies will also show up. 

Keep in mind that every time you apply for credit, the credit reference company will record the application from the prospective lender who’s checking you out. It won’t say whether or not you were approved – that’s a matter for the lender or utility. But it will show that a company asked for your record.

Tip: Don’t make lots of credit applications with different companies just to see if they’ll offer you anything. It seems that the more credit checks are completed on you, the lower your score will be.

This makes you look like someone who’s shopping around for credit. Lenders may assume other lenders are declining your applications, and draw the conclusion that you’re not the sort of customer they want.

Incidentally, this is one reason we never shop around, but instead aim to match you with the best lender for your needs.

What say you find a mistake in your credit records?

Mistakes happen. Sometimes an incorrect entry on a database will make it look like you’ve defaulted on a payment. Even worse, you might find there’s a loan or utility account you know nothing about – but which has been recorded under your name.

Identity theft is a serious crime where someone dishonestly uses your details to obtain credit, and their bad behaviour is attributed to you. If you find this has happened, you should immediately alert the credit reference agency, the company involved, and the police. 

Follow their instructions to correct the record and make sure the crime is reported. Your good name – and your ability to access credit in the future – is at stake.

What to do if your credit report gives you a low score.

All the credit checking companies use their own scoring systems, so the way they describe your risk status will differ. However, you won’t be in any doubt if they think your record makes you a sub-par credit risk. 

So what can you do to improve it?

First, check that the information is accurate. If you think there’s a mistake – or even worse, a case of identity theft – then get in touch with the affected company without delay. Ilion, Equifax and Centrix have procedures to deal with cases of incorrect data, so follow the advice on their websites.

Secondly, if a bad debt is showing, contact the lender to rectify things. You won’t be able to get the information removed, but at least the record can show that you’re cleaning up your act. 

Thirdly, don’t try to fix a debt problem by chasing new finance from different lenders. New loan applications will show up on your credit record and probably make things worse. Instead, get help from a budget adviser to put your finances on a more sustainable footing.

Finally, don’t panic. A less than stellar credit score doesn’t mean nobody will give you a mortgage. It just means you have to be thoughtful with your application and choice of lenders. And that’s where we come in.

At Sue Tierney Mortgages, we have many years of experience helping people apply for loans, even when they don’t have the best credit record. Be open about the problem, and we’ll put together an application that shows you in the best possible light. We’ll also use our knowledge of all the lenders to select the one that’s most likely to say yes.

It costs you nothing to get this help from Sue Tierney Mortgages. Just click the link below to set up a call.