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Heads in the sand when it comes to credit scores

Kiwis have got their head in the sand when it comes to credit scores

In our credit hungry world not keeping your credit score in check could impact your ability to get anything from a home to a power supplier.

A Canstar survey of 2,733 people, revealed that 60% of Kiwis didn’t know their credit score with the 40 to 50-year-olds being the worst offenders.

“Credit scores are our financial footprints and can go up or down depending on our financial habits.” Says Canstar general manager Jose George. “It’s also concerning that our survey revealed that 40 to 50-year-olds, the group least active in tracking and managing their credit scores, are one of the age groups that are less likely to pay off their credit cards.”

Maxing out on credit cards, and/or not paying off the balance in full has a negative impact on your score. Worryingly Canstar’s survey revealed that 39% of people don’t clear their credit card balance every month – rising 42% of 40 to 50-year-olds.

What is a credit score?
In very basic terms, your credit score is a rating of how reliable you have been at paying credit cards, bills, loans, rent, mortgage, etc. The more reliable you have been, the higher your score. The higher your score, the more favourable interest rates you will be able to attract when you apply for a personal loan, mortgage, store credit, etc. Scores are usually between 300-850, (on a scale of up to 1,000) with anything of around 600 or over, considered good.

How do I find out my credit score?
We have three credit rating companies in New Zealand, Centrix, Dun & Bradstreet and Equifax. To get a complete credit report and rating, you will need to contact all three of them.

Top tips for a healthy credit score
So, what happens if you get your report and you don’t like what you see? How can you influence you score for the better? Here’s a few tips:

1. Pay on time – This is a biggie and goes for everything from your rent or mortgage through to utility and credit card bills. Your payment history accounts for a large part of your score and every late or defaulted payment, is more points lost.

2. Don’t max out your credit card – How much available credit you actually use is commonly referred to as your debt-to-credit ratio. Using every available cent of your credit card limit, or in fact regularly using over 50% will have an adverse effect on your credit score. A good rule of thumb is to use between 10 and 30% of your limit if you want to keep your credit score healthy.

3. Don’t apply for different loans at the same time – If you already have credit or store cards and avoid applying for additional loans such as car finance or store credit such as the ‘interest free’ deals that are often offered around this time of year. Too many loans – or even loan enquiries make it look like you’re not managing your money well and that credit score will fall as a result.

4. Too many balance transfers – This might seem like a good idea at the time, transferring the balance from one credit card to another offering low or no interest charges for a fixed period of time. The problem with this is if you managed your debt by taking advantage of every 0% deal that comes along, it looks like you’re avoiding your debt and your credit score does not like that!

5. Got a good credit card account, keep it open – This is a mistake that can catch people out. Say you’ve got a good record of paying off your zero-fee credit card balance in full and on time but want to switch to a card that offers rewards. In this case it’s fine to apply for another credit card but don’t cancel your old card (just stick it in the drawer) as that repayment history is giving your credit score a healthy glow.

George concludes:

“If you are planning to apply for a personal or home loan, check your score. It could save you thousands of dollars in the long-run”


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