Understanding Credit Scores

Written By Kim Manunui

As we head into the holiday season it’s a good time to take a look at the importance of maintaining our credit score.

Personal to us as individuals, our credit score is one of the most valuable assets we have and should be nurtured and cared for like the precious possession it is.

We all have one, how good or bad it is depends on how we look after it. Keeping it in good order is as simple as keeping up with repayments as scheduled when agreements are entered into and it encompasses all credit providers from the likes of banks, finance and insurance companies to phone and utility providers.

Essentially a live running report, it will show if you’ve been late with payments or maintain them on time and updates your score as you go along with credit providers noting any late payments on your file.

Recorded as a measure out of 1,000 of the likelihood of us paying our bills on time, lenders like banks, finance companies, utility providers, trade accounts and even landlords use it to assess the risk of lending to you which can also affect the rate applied and decision overall.

The three credit reporting agencies in NZ of Centrix, Equifax and Illion each have slightly varying rating thresholds but the associated image shows how scores are typically rated.

When you apply for credit, lenders will run a credit check and are most interested in the last 3 - 6 months account conduct to see if any payments are reported as being late with file info deleting after 2 years.

If an account is not paid for 3 months and after plenty of warning and requests to bring it up to date, credit providers can then send it to a collection company and lodge a default on your credit file which remains there for 5 years even when paid, so ignore them at your credit file peril. These will lower your credit score significantly, are also of particular interest to potential lenders and we want to avoid these at all costs.

While late payments and defaults will have the effect of lowering your credit score and continued misconduct will result in a score so low that no one will touch it, conversely good account conduct and paying on time will improve it which can be achieved by -

  • Paying everything on or before the due date

  • Not over committing

  • Only applying for lending when you’re going to actually take it, less enquiries on your credit report is best

  • Setting up a bills account which all your bills are paid out of, direct crediting funds each pay period to that account to cover them, ideally building up a months worth in advance to allow for contingencies.

In the event something happens in your life that affects your income such as illness, injury or redundancy, it’s important to contact your credit providers who will typically work with you and enter into a payment arrangement that will work for you until you come right which won’t affect your credit score.

Another way to mitigate that is with income protection insurance that Infinance can provide, let me know if you would like us to take a look at that for you, you can check it out at -https://www.infinance.co.nz/insurance

Further to that if you are in a situation where you’re overwhelmed by bills we can look at consolidating them for you and making one lower payment across the board so you can breathe easy again, check out - https://www.infinance.co.nz/finance#personal

You also might like to check out the following link to take you to the NZ Govt guide to credit reports with more detail with a section to check your own credit record - https://www.govt.nz/browse/consumer-rights-and-complaints/debt-and-credit-records/what-is-a-credit-record/

So like always, living within your means and paying everything on time will lead to a glowing credit report so avoiding the temptation to over-do it over the holiday season especially if it’s going to lead to financial stress from January and through 2025 then you’re better to scale it back to avoid it if its going to make a difference.

If you have any questions re the above just give me a shout on the contact tab below or hit the online application tab.

And happy holidays 😊

Kim Manunui

Hi, I’m Kim and I work with a great team to help individuals, as well as small and not so small businesses get their message, product and services to the world using digital media and creating wonderful websites that don’t cost the earth.

I was born in Canada, and grew up around Vancouver and the mountains of British Columbia. My love of pristine environments led me to New Zealand and eventually to the mountains, lakes and rivers of the central North Island which is home. My family’s heritage is here, and it’s from here that Korio traverses the planet.

The digital world is never static and neither are we.

And I say ‘we’ because I work with an awesome group of talented people who I gather together as required to complete a project.  Whatever your business, not-for-profit or individual needs are we gather the best team to get the job done.

Collaboratively we are creative, share sustainable values and work hard for great outcomes because that’s the buzz of satisfaction that drives us.

If you have an audience and market to reach, we can make that happen. Creative design, words that work and smart behind the scenes stuff that cuts through the online noise. We’ll design your website and then build it. We’ll manage the content as well as all your hosting needs. We can handle your online advertising so you get noticed,
and we’ll manage your social media presence so you get the clicks, likes and engagement to grow your business. All within the budget you set, because none of this needs to cost the earth.  And the job doesn’t stop when your website goes live. We are your virtual business partner.

https://www.korio.co.nz
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