Credit Scoring In New Zealand: What You Need To Know

Summary of Credit Scoring in NZ: 

• What is a credit score?
• Is there credit score in New Zealand?
• How do I check my credit score in New Zealand?
• What your credit report includes:
• What is a good credit score in NZ?
• Credit score for home loan
• Credit score for credit card application
• Credit score for car insurance
• How can I fix a bad credit score?

What does it mean to have a good credit score? How do you know if you have good or bad credit? Can you still get a loan when you have bad credit? Why is it important? If you’re a first time borrower, consider checking your credit score first before applying for a credit card, auto loan, or mortgage. While it’s good that you have the money to pay up front, it doesn’t guarantee that you’ll get approved by your lender.

What is a credit score?

A credit score is a remark you get ranging between 300 to 850 that determines a consumer’s creditworthiness. The higher the score you get, the higher your chances of having low interest and getting approved by a lending company. 

Credit scores in New Zealand are often the same as that of other countries. It reflects on your credit report that lenders evaluate to know if you can pay off your debt on time. Note that this isn’t the only factor they consider when you apply. You will likely to get approved or rejected depending on your entire credit history and background. 

Is there credit scoring in New Zealand?

Yes. Credit scores in New Zealand start from 0 to around 850, which you will likely earn if you know how to manage your credit well. There are several lending companies in New Zealand that offer various types of loans for certain types of consumers. So, it’s best to monitor your credit report regularly to know how your credit is doing and have ample time to fix a low credit score sooner than later. 

How do I check my credit score in New Zealand? 

Reports have shown that many Kiwis overlook the importance of their credit score until they apply for loans and are turned down for having bad credit. That’s why it’s important to look into your credit standing with credit bureaus in New Zealand that provide you with your credit data for free. Credit score in New Zealand can be found when you get a copy from:

• Centrix
• Illion
• Equifax

What your credit report includes:

• Credit cards
• Mortgages
• Car finance
• Hire purchases

Your report when requested usually takes 10 business days to process but if you need your credit score right away, you will have to pay for an express fee of $6 to $9.95. 

What is a good credit score in NZ?

Earning a good credit score doesn’t necessarily provide lenders a general assessment of your credit history. Your good credit rating however can up your chances of getting a loan, and more importantly, puts you in a better position as a consumer. 

There’s no uniform range system to determine what your actual credit score is. It will vary depending on the credit bureau calculating your credit score.  

To give you an idea, here’s an overview of the credit score ranges from NZ’s major credit reporting agencies.

By looking at the table, low scores range between 0 to 494; Fair 300 to 649; Average 500 to 768; Very good 700 to 845; and Excellent rating between 800 to 1,200. 

If you’re seeking to take out a loan some time in the future, you would probably want to earn an average score of 500 to 650 which is considerably healthier than incurring several points lower. Having an average score usually means that you pay your bills on time with zero late payments or reported foreclosure. 

Credit score for home loan

Applying for a mortgage or home loan in NZ can take you a while before getting approved. Loan companies, like any lenders anywhere, impose standard requirements to avoid dealing with high risk borrowers. An average credit score between 500 to 699 would give you a good chance of securing a mortgage or personal loan, while also complying with other criteria set out by your lender. 

Credit score for credit card application

Apart from your income and finances that make up your credit history, credit card companies take into account your credit card balances, if any, to know if you are qualified to get approved for another credit card. There’s no definite score that companies require regarding credit card applications but just to be safe, you should maintain an average score between 500 to 700 at least. 

Credit score for car insurance

Banks and lending companies are also keen to check auto loan and insurance applications. A credit report is one of the main requirements prior to any approval. This will also help them determine your insurance quote, and how much you will pay for your interest. Make sure that you’re within the 500 score range or above to secure your auto loan fast. 

How can I fix a bad credit score?

Incurring a negative credit score can be redeemed only if you’ve admitted that things need to change and that change should start with you. 

Your bad credit score reflects on how you deal with your money. This usually happens when you always delay your payments or max out your credit. One way to check is run a credit report with a credit bureau to get a better idea on how you can remedy a very low credit stat. 

Ideally, you want to be using under 10% of your credit for it to be considered “safe.” So, if you have a credit limit of let’s say $10,000, you should only be spending $1,000 at most a month in order to get a high credit score on your report. 

Late payments stay on report for 7 years, which usually means that you’re over 150 days late from your due date. Having multiple late payments is worse than having just one. So, it’s advisable to always be mindful about your payment periods and pay off your bills ASAP. What you can do to switch to better plans like mobile, broadband or power so you won’t have to worry about hidden costs and other overcharging. 

Your credit score doesn’t define who you are but it can help to keep your spending at bay. Make small efforts to increase your rating by paying on time and managing your expenses within your means.