How credit reporting works
Privacy Act 2020, s 22, Principles 6-8; Credit Reporting Privacy Code 2020, clause 5, rules 6-11; Credit Reporting Privacy Code 2020
Credit reporting agencies gather and sell information about individual peoples’ credit histories. The information they can report on includes your current credit accounts, such as hire-purchase arrangements and loans (including credit limits and your repayment history), whether you’ve ever failed to make (“defaulted on”) your repayments, any court judgments given against you for debts, and whether you’ve ever been declared bankrupt. They also look at your payment history for phone, electricity and gas accounts and if you have any outstanding fines or reparation.
What is a credit score?
Credit Reporting Privacy Code 2020, clause 4
You are given a credit score – this is a number between 0 -1,000 (the higher the number, the better your rating). This indicates how credit worthy you are and how likely you are to pay back the loan on time so a history of paying your bills on time will give you a higher score. Your score isn’t fixed – it can change over time as “old” information drops off your credit file, for example a default from ten years ago won’t affect your score anymore.
If you have never applied for any credit that gives you no credit history at all. No credit history means the lender has no information about you or the likelihood you can make your repayments. This might lead them to turn you down.
What things negatively affect my credit rating?
Missing (“defaulting on”) payments on loans and even on smaller bills like power and phone will reduce your credit rating. Things like shifting debt from one account to another (like from one credit card to another card), applying for too much credit or for too many payday loans, having debt collectors involved or going through an insolvency procedure like bankruptcy or the no asset procedure will also have a negative impact on your rating. Making a hardship application to your bank or other lender is also taken into account.
How can I improve my credit rating?
You can improve your credit rating by paying your bills on time, paying your credit card off in full each month cancelling unused credit cards, limiting credit applications and payday loans.
Be wary of sharing bills with other people like flatmates as their failure to pay bills can affect your rating.
Who can see my credit information (“do a credit check”)?
Credit Reporting Privacy Code 2020, Schedule 5
People who will want this information may include lenders, prospective landlords, employers and insurers, but they can’t get it without your consent. However, credit reporting agencies generally don’t need your consent to provide credit reports to debt collectors, people involved in court proceedings against you, and certain government agencies (for example intelligence agencies preparing a security clearance).
Credit reporting agencies must take reasonable steps to make sure the information they hold about you is accurate, up-to-date, complete, relevant, and not misleading.
How long does information stay on my credit file?
Credit Reporting Privacy Code 2020, Schedule 1
There’s a time limit on how long they can continue to report on particular things. Credit application and payment default information stays on file for five years.
After a bankruptcy comes to an end (a “discharge” from bankruptcy), credit reporters can continue to report this for four years but no longer, and they must not keep the information about the bankruptcy for more than five years after the discharge. The same time limits apply after you’re discharged from the no-asset procedure (see “When you can’t pay your debts: Bankruptcy and other options”). But if you’ve been made bankrupt twice or more, or been made bankrupt and been through a no asset procedure, that information is kept indefinitely.
Getting a copy of your credit record
Privacy Act 2020, s 22, Principle 6, s 1; Credit Reporting Privacy Code 2020, cl 5, rule 6(1)(b), cl 6(2)(b)
You have the right to ask for a copy of your credit report. If any of the information isn’t correct, you can apply in writing to the credit reporting companies for it to be corrected.
Three credit reporting companies (Centrix, Equifax and Illion) operate in New Zealand. To check your record, or to correct any information, you’ll need to contact them all (see “Where to go for more support” at the end of this page).
A credit reporting company must give you a copy of your report within 20 working days after you ask for it. They can’t charge you for this unless you ask for them to provide it within five working days, in which case they can charge you up to $10 (including GST).
What if there is a mistake on my credit record?
Credit Reporting Privacy Code 2020, clause 5, rule 7
If you believe there is a mistake on your credit report you can contact the credit reporter to ask for it to be corrected. The credit reporter will make a decision to either correct the mistake, or tell you why they are not willing to change the mistake within 20 working days.
Even if they refuse to change the mistake, they have to make a note on your credit report that you requested the change, If you are not happy with why they are not willing to make the change on your credit report, you can complain to the Privacy Commission. See “Complaining to the Privacy Commissioner” in the section “Privacy and Information”.
Does checking my own credit record affect my rating?
No, checking your own credit score will not lower you rating.