Credit score, everyone’s got one, how’s yours?

Written By Kim Manunui

One of our greatest assets is our credit score. We all have one, how good or bad it is depends on how we look after it.

The three main credit reporting agencies in NZ of Centrix, Equifax and Illion use different methods for rating but in general scaling down from 1,000 a score –

  • above 800 is considered excellent,

  • above 740 very good,

  • above 670 is good,

  • above 580 is fair,

  • down to 300 is poor and

  • below 300 is a no go zone, as per the Equifax graph included.

Maintaining a healthy credit score is vitally important to building a strong financial future and will open doors that a poor credit report will close. Essentially a living record of your financial reputation, lenders will look at your report each time an enquiry for finance is make and see what’s been recorded, the good, the bad and the ugly.

The good is the stuff that builds your credit score like paying ALL your bills on time, running a low amount of credit, keeping credit cards to a minimum and preferably under 30% of its limit showing fiscal responsibility and paying them off monthly, and a low number of credit enquiries is good, less is best so only apply when it’s actually needed.

The bad is loads of credit and credit enquiries, late payments, even just one, that are recorded and held on a moving scale for 2 years and the ugly is those late payments turning into demand letters and ultimately defaults listed for non-payment that are credit score destroyers that are held on your report for five years, we need to avoid these at all costs.

Living within your means is the best way to avoid over committing and not running up heaps of credit just because someone will give it to you. Running a budget so you’re cash flow in front rather than playing catch up is the smart thing to do.

Given that life can get in the way of the best laid plans, the good news is NZ runs a ‘positive reporting’ system so if you do hit a rough patch you can build your score up again in time with good conduct.

Things to do –

  • Pay ALL of your bills on time and NEVER be late

  • Minimise personal lending and credit enquiries, less is best

  • Be cash flow in front

  • Build cash reserves so you’re 3 – 6 months in front of your bills acting as a contingency fund

  • Budget so you know your living costs

  • Open a bills account and allocate funds to that first so they’re covered

  • Aim to be debt free of lending for personal expenses, its destroys your future

  • Pay cash for small ticket items from savings

Things to not do –

  • Be late paying bills, each late payment is recorded on your credit file and remains there for 2 years and reduces your credit score

  • Let bills mount up until they’re unmanageable and defaults are lodged against your credit file

  • Take out lots of personal lending

  • Make a lot of credit enquiries, less is best

What to do if something goes wrong and you can’t manage your bills

  • Talk with your creditors and arrange a plan to pay them off, this will also save your credit score

  • DO NOT ignore contact from creditors, work with them to help you through it

  • If you have lots of loans, pay off as many small ones as you can and get them gone then throw that money at the big ones, ideally paying the higher interest rate loans off first but never miss a payment.

  • Don’t do it again … lol.

Ways to create a successful financial future -

  • Look at your income and aim to save as much of it as you can

  • Budget to see what your fixed costs, the MUST PAY’S are and ensure they’re covered before you spend on anything else

  • Save 10% of what you earn as a minimum

  • Build a contingency fund – save first

  • Then when you have a bit to spend then go ahead and spend it to enjoy life BUT –

  • Spend first and try to catch up later and worst, borrowing to do it, only destroys your future

I know that sounds like your dad talking but as a finance broker I’ve seen it all and seen the effects of getting into too much debt and the low credit scores it produces … borrowing for the right purposes is fine but there is lots of debt out there that’s bad and should be avoided … but more on that next week.

Disclaimer: The above is general in nature, does not take your personal circumstances into consideration and not to be considered financial advice.

Hit the contact tab below to arrange an appointment if you would like a review of your circumstances.

Kim Manunui

Hi, I’m Kim and I work with a great team to help individuals, as well as small and not so small businesses get their message, product and services to the world using digital media and creating wonderful websites that don’t cost the earth.

I was born in Canada, and grew up around Vancouver and the mountains of British Columbia. My love of pristine environments led me to New Zealand and eventually to the mountains, lakes and rivers of the central North Island which is home. My family’s heritage is here, and it’s from here that Korio traverses the planet.

The digital world is never static and neither are we.

And I say ‘we’ because I work with an awesome group of talented people who I gather together as required to complete a project.  Whatever your business, not-for-profit or individual needs are we gather the best team to get the job done.

Collaboratively we are creative, share sustainable values and work hard for great outcomes because that’s the buzz of satisfaction that drives us.

If you have an audience and market to reach, we can make that happen. Creative design, words that work and smart behind the scenes stuff that cuts through the online noise. We’ll design your website and then build it. We’ll manage the content as well as all your hosting needs. We can handle your online advertising so you get noticed,
and we’ll manage your social media presence so you get the clicks, likes and engagement to grow your business. All within the budget you set, because none of this needs to cost the earth.  And the job doesn’t stop when your website goes live. We are your virtual business partner.

https://www.korio.co.nz
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Preparing a successful finance or mortgage application