We are being recognised more and more often by our credit scores these days, so it’s long past due that we all took the time to understand what a credit score in NZ is and how it works.

What is a Credit Score and How Does it work?

A credit score is a point system that indicates how creditworthy you are based on your financial history. It is informed by and will express how good you are at paying your debt and bills on time. Your credit score will be between 0 and 1000, with most people falling somewhere in the 300 and 850 range. The higher your score, the better your credit rating will be.

Why Should I Care About My Credit Score?

Maintaining a good credit score is crucial as it will usually have an impact on three major parts of your ability to get personal loans in NZ:
• Ability to borrow
• Amount borrowed
• Interest rates

A poor credit score will suggest to lenders the risk of loaning to you is high, which may cause them to require a higher interest rate and, in extreme scenarios, refuse the loan entirely.

A high credit score will indicate that there is little risk involved with lending you money, so you may be offered favourable interest rates and find it a lot easier to get a loan in the first place.

What Affects My Credit Score?

Whether you have a high or low credit score, understanding how you got to this point is a financially responsible step every Kiwi should be taking. Your credit score will be affected by many things, such as:
• On-time repayments
• Amount you borrow
• Lenders used

Different behaviours will have varying impacts on your score. A missed power bill from four years ago won’t affect your score as much as a default from last week. Many things impact your score, but generally speaking, if something affects your ability to make a repayment, it will have a significant impact.

How Do I Improve My Credit Score?

If you’ve got a bad credit score, don’t worry – it is possible to improve your score over time. The first step is to get on top of your debts. Aim to avoid missing repayments and get back into a regular payment cycle. A positive repayment history demonstrates that you have rehabilitated your financial behaviour by showing a record of prompt repayments.

Credit score hiccups such as defaults will become less relevant as current payment patterns become more relevant. Defaults can still have a negative impact for up to five years, but it can be lessened by subsequent positive credit behaviour.

Make a Comeback with Why Not Finance

If your credit score isn’t quite as good as you’d like, remember you can always make a comeback. At Why Not Finance, we can help you take the first step to better credit by assessing your situation and helping you get your finances in order. With online same day loans and debt consolidation available, it’s never been easier to enjoy financial freedom.