A credit score also known as a credit rating, is a number between 0 and 1,000 that indicates how credit-worthy you are. The higher the score the better. It’s a measure of your ability to repay debts based on your financial history, including borrowing and repayment of loans.
Why is Your Credit Score Important?
Your credit score affects several aspects of how you manage your finances, including:
- Loan Approvals & Interest Rates – A high credit score can increase your chances of getting a personal loan with better terms.
- Credit Limits – Lenders may offer you higher credit limits if you have a strong credit score.
- Rental Applications – Some landlords check credit scores before approving rental agreements.
- Employment Opportunities – Certain jobs requiring financial responsibility may involve a credit check.
How to get a credit rating in New Zealand:
- Establish a credit history:
You need to have a history of borrowing and repaying debts to build a credit score. This can include having a credit card, taking out a loan, or even having utility bills.
- Request a credit report:
You can request a free credit report from one of the three major credit reporting agencies in New Zealand: Centrix, Equifax, or illion.
- Review your credit report:
Once you receive your credit report, you can review it to see your credit score and other information about your borrowing and repayment history.
- Monitor your credit report:
Regularly check your credit report to ensure there are no errors and to track your progress in building a positive credit history. If you spot an error in your report, you can take the following steps to dispute it:
- Check your report regularly – Obtain reports from all three major agencies.
- Identify inaccuracies – Look for incorrect details about late payments, outstanding debts, or identity mix-ups.
- Contact the reporting agency – Each agency has a dispute process to correct errors.
- Provide supporting documentation – This could include bank statements or proof of payment.
- Improve your credit score:
If you find that your credit score is low, you can take steps to improve it, such as paying your bills on time, reducing your debt, limiting credit applications (as applying for too much credit in a short period can lower your score) and keeping your credit card balances low.
How is Your Credit Score Calculated?
Several factors affect your credit score:
- Payment History – Paying your bills on time has a significant impact.
- Credit Accounts – The types of credit accounts you have (mortgages, credit cards etc.), as well as the amounts owed, can affect your score.
- Length of Credit History – The longer your credit history (record of you paying regular bills), the better.
- Recent Credit Inquiries – Too many recent applications for new credit can temporarily lower your score.
Interpreting Your Credit Score
Your credit score falls within ranges which indicate your level of creditworthiness
- Excellent (800-1,000) – You’re highly likely to get approved for a credit application with the best rates.
- Very Good (700-799) – Lenders are more likely to see you as a reliable borrower.
- Average (500-699) – You should be able to access standard loan terms across a range of financial products.
- Fair (300-499) – You could encounter higher interest rates for lending applications and difficulty getting approved.
- Poor (below 300) – You may struggle to secure credit – for a loan or credit card.
For more information on credit scores click here.