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Survey reveals three in five Kiwis don’t know their credit score

Contributor:
Fuseworks Media
Fuseworks Media

In the season of traditionally higher consumer lending and spending, a Canstar survey of 2,733 people, reveals that 60% of Kiwis don’t know enough about the thing that could cost them dear - their credit score.

"Our credit scores are these largely invisible things that attach themselves to us. They can increase or decrease depending on our financial habits and position." Says Canstar general manager Jose George. "They have a huge influence on whether, how much and at what rate, a lender is prepared to loan us money as it’s an indication of our credit (or trust) worthiness to pay that money back. It’s worrying that such a large number of people are unaware what their score is as it could be costing them more than they realise."

What is a credit score?

In very basic terms, your credit score is a rating of how reliable you have been at paying 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 350-800 (on a scale of up to 1,000) with anything over700 being considered good.

Top tips for a healthy credit score

It’s now easier than ever to find out your credit score with services available online that can give you (in most cases) an instant answer. But what happens if you don’t like what you see? How can you influence you score for the better? Here’s a few tips:

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.

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.

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 crdscore will fall as a result.

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, not dealing with it and your credit score does not like that!

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:

"Credit scores are not fixed. They respond to your financial activity so can go up as well as down Check yours regularly and take the opportunities to improve your score whenever you can, especially if you are planning to apply for a personal or home loan."

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