Your credit score and why it matters

Are you in the dark about personal credit scores? How it impacts on how much money you can borrow? And, how you find out what your rating is?

We’re here to shed some light, explain why it’s an important tool for lenders, and a few tips on how you can make sure yours shines! 

What is a credit score?

Put simply, your personal credit score highlights your history of how promptly you pay your bills and pay back you credit obligations, such as a credit card or a loan. It is a number between 1 – 1,000, and the higher you score the better your credit rating is.

If you’ve ever had a credit card or even a phone contract you will have a credit history. Your credit data is supplied by companies that give credit (E.g. Banks, finance companies, power companies, phone companies), to credit agencies who report and record your credit information. This information can include instances where you’ve applied for a loan, paid bills on time, made overpayments, as well as if you’ve missed a payment or even been declared bankrupt.

Why does your credit score affect your ability to get a loan?

Credit scoring and reporting helps lenders like us get an insight into how reliable you are with your finances – how often you’ve paid your bills on time and, how likely you are to pay them on time in the future. It can be used to determine your level of risk before deciding whether or not to lend you money. Your credit score not only impacts your ability to get a loan but can also impact the interest rate you pay. The better your credit score, the more likely you’ll have credit approved and, the cheaper it should be too.

So, how do you get a good credit score and what can you do to improve a low one?

Firstly, find out what your credit score is. New Zealand has a small number of credit reporting agencies who hold your credit data, and it’s an easy process to access your own personal credit history and credit score information. To get a free copy of your personal credit report provided by Centrix Credit Bureau, visit their website here.

Once you have your credit report in hand you can start to look at ways to improve your score. Here are some tips:

• Pay your bill on time, every time! Set up a direct debit and take the hassle out of remembering when something is due to be paid.
• If you have missed a payment, settle the outstanding amount as soon as possible.
• Avoid applying for small loans or credit cards too often. Multiple applications at the same time can negatively impact your score.
• Having a good long positive credit history will help to get you a higher credit score.

As you can see, how reliable you are with your finances directly reflects your credit score and can impact on how successful you’ll be when applying for a loan.

Check out our easy to use loan calculator to see what your loan repayments may be, and, If you have any questions around applying for finance please get in touch with our friendly team today. Alternatively, if you have a loan with us and are experiencing an unforeseen change in your financial situation, don’t leave it too late to contact us, we may be able to help.

Concerned about your finances?

Get confidential financial mentoring or budgeting advice from Money Talks, an organization that offers advice at no cost to you. Call them on 0800 345 123 or visit their website here.