How good is your credit score?

How good is your credit score? Checking is simple, and free. All you need is some details from a driver’s licence (or passport) and a click on the website creditsimple.co.nz. It literally takes less than a couple of minutes.

A credit score is a number between 0 and 1,000 that indicates how credit-worthy you are, and how likely you are to pay your bills on time. Most credit scores are between 300 and 850. The higher the score, the better your credit rating is. A good score is more than 500.

The higher the score the more likely it is that you will be able to get credit from suppliers, lower interest rates from banks, and better deals from telcos, insurance companies and utility companies. A bad score can lead to companies being reluctant or unwilling to give you credit, or charging a higher interest rate.
As well as viewing a credit score, Credit Simple provides a credit report, which is a history of bill payments, any defaults, court judgements, and how much credit a person has (such as a mortgage or credit cards).

Credit reporting has until recently been based on “negative credit events” – payments not being made. But it is undergoing something of a transformation with two major banks now providing “positive” information to the big credit ratings agencies, and the other major banks likely to do so before the end of the year. That means good money habits like paying bills and loan repayments on time are now recognised and can influence a person’s credit score. That is providing greater differentiation between those with good and bad credit records, and giving banks a greater ability to tailor their lending to risk profile.

Virtually everyone has a credit score, even though they may not know it, and everyone should know what it is. Those with a good credit record can use it to their advantage, like using it as a basis to negotiate a lower mortgage rate from their bank, or tenants applying for a rental could use it to show they are a low credit risk – after all, a person who is responsible with their money is more likely to be a responsible tenant.

Given how simple it is to obtain a credit score, it is surprising how few landlords do so when vetting potential tenants. It’s also surprising how many businesses give credit to customers without first undertaking a credit check, only to end up regretting it later.

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