Amanda Morrall ponders her credit rating, looks at proposed revamp of credit ratings in NZ to allow lenders access to two year history on bill payments and more

By Amanda Morrall

I'm too cheap to pay for a same day copy of my personal credit report ($30) but if I was patient enough to wait 10 days I could get it for free.

I'm not sure what the point is as I don't own a NZ credit card (and will do my best to avoid having to get one), but I confess to a certain amount of curiosity in finding out what would appear on my secret file that only creditors (and myself) have the privilege of seeing.

If proposed changes currently under review by the Privacy Commissioner go through, it could make for more interesting reading.

At the moment, the credit rating system in New Zealand works on a negative screen system where the only information that is revealed to prospective lenders is the number of times you've applied for credit and also the number of times you've defaulted on it.

The so-called positive rating system that's under consideration would include a broad spectrum of consumer banking history including whether you were late paying the phone or power bill, your insurance, mortgage or other such routine payments going back two years in time.

As far as I'm aware, my record is clean except for one occasion where I was two weeks late on my phone bill. Oh, and a few parking violations, which I also attended to before credit sharks came calling.

Whether that single incident will mar my rating, I'm not sure. Telecom still seems to want my business. 

Knowing what's on your books would be one of the advantages of doing this self-check I suppose. The other benefits, at least those extolled by credit reporting agencies is that you and any further lenders will be on the same page. If your individual credit record was tarnished by a former partner with whom your finances were co-mingled then you'd at least know why you were getting the cold shoulder by the bank or another lender. And conceivably you could work to remove the stain on your record.

According to a survey undertaken by the credit reporting agency Dun & Bradstreet, only one in 10 Kiwis have ever bothered to check their own credit history.

The study also found that 39% of those surveyed didn't have a clue about personal credit reports. And further that 48% did not know they could obtain a copy of their report. Almost 60% didn't know what to do about it.

Dun & Bradstreet general manager John Scott said it was concerning that more Kiwis weren't aware of their rights in knowing their credit rating and how to go about it given the ''central role personal credit reports play in the credit assessment process.''

To fill the information void, it has developed a website that allows people to check for themselves.  It's NZ$30 for an fast-track report or free if you wait the 10 days.

While Dun & Bradstreet suggested it was the first time such a service had been made available to New Zealanders, a similar facility was rolled out in 2009 by  its main competitor Veda Advantage. I don't doubt there are some nuances between the two services.

Given recent indications that  credit cards are becoming a more common way to bridge financial shortfalls, Scott maintains that users ought to take more of an active interest in knowing what's on their personal records.

A previous survey by Dun & Bradstreet found that 34% of people expected to use their credit card to pay for otherwise unaffordable expenses. In the case of Christchurch residents, the figure was 56%.

While greater access to information on New Zealander's credit records seems, to me, most advantageous for lenders themselves hoping to reduce their own risk, reporting agencies suggest there is a benefit for consumers too.

An argument in favour of this positive reporting system is that it could reward responsible consumers (whose clean records would be more apparent to lenders because of broad access to their payment history) with more competitive interest rates.

From a consumer's perspective this seems sensible. It would not only reward consumers for responsible credit behaviour but it would act as an incentive for those indifferent or lackadaisical about carrying debt to clear it on a monthly basis and adopt better paying habits in order to attract a better interest rate.

Whether lenders would adjust their rates is another question, hopefully one the Privacy Commission is looking into as part of the bigger picture.

Other highlights from Dun & Bradstreet 

• only 35% of respondents 25 to 30 were aware it is possible to obtain a personal credit report, compared with the national average of 52%.
• those with the least knowledge about personal credit status were aged 25 to 30.
• Of the 13% surveyed who had tried to obtain a copy of their personal credit report, most were between the ages of 30 and 44 on low-incomes with four family members under the age of 18.
• 36% of those earning more than $200,000 per year did not realise they had a credit history.