How does credit scoring work?
We consider information provided by customers and information obtained from credit reporting agencies via a credit report. The credit scoring system allocates points for each item of relevant information. These are then added up to arrive at a credit score.
This credit score summarises information held on your credit report, information on your application or information from other accounts that you hold (or have held) with us.
Credit scoring calculates the level of risk for each application and the applicant's ability to afford the repayments. If the level of risk exceeds the accepted tolerance, then the credit is considered unaffordable, and we are unable to risk granting credit.
Additionally, there can be other specific policy rules that determine whether a financial organisation will lend. Lenders have different lending policies and scoring systems, and so an application may be assessed differently by different lenders. This means that one lender may accept your application, but another may not.
How do credit reports work and what is a credit check?
Whenever you apply for a loan, hire purchase, credit card, store card or line of credit lenders will look at your credit report to understand your credit health and debt. You’ll have a credit check run on you by the organisation you’re asking to lend you money. Applicants need to give permission for a credit check, which is carried out by a credit reporting agency.
A credit check generates a report that includes information like your history of paying bills and repaying debt. This gives credit providers an idea of how likely you are to repay money they might lend you. When a credit check is completed, the lender requesting it is also added to the applicant’s credit enquiries.
Information from utility providers (e.g., electricity, internet, gas etc) appear on your credit report, so it's important to make all payments by their due date. Late bill payments, defaulting on a loan or credit card are also likely to appear on your credit report. It can include details about your:
- credit cards
- motor and personal loans
- repayment history for your utilities
- hire purchases
- arranged overdrafts
The status of your credit history is important as it can affect your ability to borrow money. Your personal and financial information is covered by the New Zealand Privacy Act. You can find out more on the Privacy Commissioner’s website.
What is comprehensive credit reporting?
Your credit report doesn’t just keep track of financial hardship or late payments, it can also show the repayment history on any open accounts.
Latitude participates in comprehensive credit reporting. This means we report on the type and amount of credit you’ve received and how your repayments are going. This includes positive reporting rather than just negative. It provides a clearer picture of your finances and shows if you've recovered from credit difficulties in the past.
How do I check my credit report?
For a free copy of your credit report and credit rating contact the below credit reporting agencies. Different agencies can hold different information so you may have a credit report with more than one agency:
When you get your credit report, check that the loans and debt listed are yours and details like your name and date of birth are correct. If something looks wrong or out of date, contact the credit reporting agency and ask them to fix it. This is a free service.
How do I improve my credit rating?
Here are some ways you can get your credit rating back on track:
- Pay your bills and loans by the payment due date.
- If you’ve missed some payments in the past, start making regular payments. A pattern of regular payments will start to show a picture of positive financial behaviour.
- Check your credit report and dispute any errors.
- A large number of credit applications could be bad thing. If you apply for several credit cards or loans at once or over a short period of time, it could look like you’re experiencing some financial difficulty.
Related Article: Will Hardship Care have an impact on my credit rating?