New Zealand has two main credit reporting systems that lenders use in the asset finance market – Centrix and Equifax. Equifax was the most common agency until Centrix brought in comprehensive credit reporting. This shows lenders how on time or late you pay your bills. All participating companies report every month on their clients paying on time or late – if late, how late. They can see if your account is a month in arrears, 3 months in arrears etc.
This is the main impact on what your credit score is, in addition to how many enquiries show up on your credit file and defaults. Whilst many company’s run a search as a “quotation enquiry” which doesn’t affect your score, many still use an older classification where them checking your score, will reduce it (too many in a short space of time, an enquiry here or there doesn’t have a large impact on your score).
Get all the defaults paid So how do you fix your credit score will come down to why it is low. In most cases – bad credit comes from defaults. When you have agreed to a financial commitment, not made the payments and the loan has gone to collection. This shows the lender that you are a higher risk and therefore only higher risk lenders will take a chance on you and they will charge you more for taking on this risk. Having all defaults paid is the best option to improve your credit score. After a few years – they will then drop off your file and your score can recover.
There are very few explanations lenders will accept for defaults, but once they are paid, lenders can see you will do your best to meet your financial commitments and they feel more secure in providing you with a loan. This will then help you build a history of paying your debts on time – leading to a better score moving forward and better rates being offered. Just agreeing to start paying a default for an approval, doesn’t do much to give a lender peace of mind – they will simply wonder why you didn’t pay it sooner if you have the capacity to do so, unless the debt is in dispute. If the debt is in dispute – it should show as such on your credit file.
Defaults over $2k or financial, will typically result in an automatic decline with most mainstream lenders, there is not much space for negotiation if there are unpaid debts above this level.
Get a copy of your credit report
You can easily request a free copy of your credit report from Centrix or Equifax by contacting them directly, you can then work with them to help understand your report or contact us and we can help you interpret what it means and what options are available based on your credit profile.
Pay all debts and obligations by direct debit
The best thing you can do to repair bad credit score is to pay all debts and obligations by direct debit, make sure you have funds in your account so payments don’t dishonour and keep enquiries on your file low – a busy credit file not only reduces your score, but you will find you don’t get offered market leading rates as brokers have to price in the extra time in finding a solution with a busy credit file. Particularly if there are multiple brokers working on your application – most good brokers will have access to the same facilities and the same rates. The difference between us comes down to knowledge of the market and which lender best fits your situation. You may be self employed and only have bank statements for proof of income and no access to a profit and loss – this will result in a submission to one lender, compared to another that will only assist if you can produce financials or a Xero/MYOB profit and loss.
There are many brands out there in NZ but very few finance companies, the best thing you can do for your credit is to find a finance company in NZ or few where you like their story, background, service and if possible – NZ owned to support local. Most of the bigger brokers in NZ are not locally owned and profits end up overseas.
