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NZers' Credit-Risk Profile Improves

New Zealanders Credit-Risk Profile Improves While Fewer Seek Credit

AUCKLAND, 26 July 2010 – New Zealand’s first consumer credit scoring regime shows people are becoming less risky when it comes to scoring their ability to pay back loans.

VedaScorePlus is the consumer credit scorecard launched in July last year It predicts the likelihood of adverse credit information, such as a default, appearing on a person’s credit file in the next 12 – 24 months.

The scorecard is supported by rigorous statistical algorithms and this finding shows the strength of the scorecard in reflecting individual and population behaviours. High quality raw data has been analysed to arrive at the 12 percent figure.

A recent internal review of VedaScore Plus taking in 1.26 million consumer credit records from July 2009 to March 2010 shows the general population’s risk-profile improved by 12 percent.

This is reflected in individual credit scores which are calculated at the moment they are requested by a credit provider.

Veda Advantage Managing Director John Roberts says there are a range of explanations for the change in risk profile.

“It could show that people are paying off debt or that fewer people are actually taking on credit or a combination of both factors. Ultimately this behaviour will manifest itself in 12 to 24 months time when we will see fewer people defaulting on payments.”

“These findings may also reflect the cut-back in the amount of credit being offered to people by banks and finance companies – and it could be only those low-risk applicants who are now being offered credit in the first place.”

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Veda’s bureau statistics also show a significant drop in the volume of credit inquiries which are down 10.39 percent for the first six months of this year compared with the same period in 2009. Credit enquiries relate to consumers demand or appetite for credit. Defaults increased by 1831 percent over the same period which shows that pain is still be felt.

“We believe this shows the impact of the credit crunch – as we move out of one of the most devastating financial crises New Zealanders have endured they are becoming less risky to lend to while at the same time fewer people are applying for credit,” Mr Roberts says.

He says “it is up to the economists to explain the implications of this for the economy but in the medium term a better attitude to borrowing can only be of benefit to individuals and the country.”


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