Credit history issues are catching up with Kiwis

0
Even getting a bank account can be difficult with bad credit.

IVELIN RADKOV/123RF

Even getting a bank account can be difficult with bad credit.

Natalie Carseldine, a woman from Canterbury, is used to not getting the best deal. Whether she’s renting privately and paying extra, paying a deposit for her electricity, or worrying about getting a phone connection, she knows she’ll have an extra hurdle to jump through.

This is because she has a black mark on her credit history from hire-purchase agreements that went wrong when she was younger.

Bad credit is a relatively common problem. Just under 15% of New Zealanders have negative information on their credit report.

But while you can expect an overdue bill to prevent you from taking out a loan, there are a number of other situations where a black mark on your credit score could get in your way.

READ MORE:
* New Zealand banks turn away customers for ‘minor’ credit issues
* Getting your credit in order will help you if you’re buying a home
* Dun and Bradstreet are the first to let people check ‘credit scores’ instantly and for free

TO RENT

Most property managers do a credit check on potential tenants when renting a property and will be hesitant to list someone with a history of missed bills.

Tenancy Information New Zealand is the most common method used by landlords – you can contact them to see what information they hold about you.

Darryl Evans of the Mangere Budgeting Service said many people who applied for houses through Housing New Zealand and had to wait were referred to the private sector instead, where they were sometimes charged $10 or $15 a more than the advertised rent due to their bad credit. .

POWERFUL

Many electric companies will not enroll a new account holder who has bad credit. This means that these people are often stuck with prepaid electricity accounts, which can be more expensive and are not available across the country.

Credit Simple managing director David Scognamiglio said that even if you already had a power connection, bad credit could prevent you from switching to a new provider for a better deal.

BANK ACCOUNT

Evans said he’s met many people who even struggle to open bank accounts because of bad credit. His team usually referred those people to a credit union, which he said would still do a credit check but be more flexible.

CREDIT CARD LIMIT

Scognamiglio said people with bad credit may find it difficult to extend their credit card limits if they need to. Even if you have an active card with a provider, they will usually check your credit report before offering a higher limit.

MORTGAGE

Scognamiglio said even a small black mark can sometimes get in the way of a mortgage application. “Banks look at things like telecom and power faults. You could go to an auction and raise your hand and feel good about winning the auction that day. But a telecom fault of $50 or $200 can keep you from getting a mortgage.”

LEASE-PURCHASE AND PERSONAL LOANS

If you need appliances or furniture for a new home, you’re probably out of luck if you want a hire-purchase agreement. Likewise, banks and other lenders that charge prevailing interest rates often won’t lend to people with bad credit. This is what drives a number of people to enter into higher interest transactions with finance companies.

CALL

You may not be able to get a landline or mobile account if you have bad credit. There are prepaid options available for landlines, but these tend to cost more. Most people with bad credit end up using a prepaid mobile.

JOB

Scognamiglio said some employers would also want to do a credit check when recruiting. A bad credit report can make someone seem unreliable.

But Evans said a significant proportion of people who came to his organization saying they had a bad credit history turned out to be in the clear.

He said some companies have threatened to send bills to debt collectors, but have failed to do so.

He recommended anyone concerned get a credit report to see what information it contained. “Sometimes there are ridiculous things and you can write and say you have a problem with it and have it taken down.”

Carseldine said she has since paid off all her bad debts and started paying everything in cash to avoid any problems in the future.

Some tips from Veda to improve your credit rating

1. Pay monthly repayments on time – set up direct debits or schedule repayments for your payday. Under Complete Credit Reports, the monthly repayment history of your credit commitments can be logged in your credit file.

2. Keep track of your credit commitments – do your research before applying for credit and only apply for credit when you really need it.

3. Pay all defaults – by paying all outstanding defaults, these will be listed as paid (vs. unpaid) on your credit file.

4. Check your credit report to make sure it is correct – correct any errors.

5. Regularly monitor your credit report and score to see if anything changes.

Share.

Comments are closed.