How credit scores work, the impact of bad credit, and how to improve your score.

Whether you have a good credit score, bad credit, or no credit at all, your credit history and score impact your life.

Your credit history is how future lenders, landlords, insurance providers, employers and more may decide if you are a relative risk when it comes to stability around money.

While your information is held by a credit reporting company, not you, you can take back control of your credit score by understanding:

  • how to check it
  • how to fix errors
  • how to improve bad credit and build a good credit history
  • time limits for items in your history, eg missed payments and defaults
  • what to do if something goes wrong.

Credit definitions

There are a number of terms used around this information. Each means something slightly different:

Credit history: A list of all your loan transactions including payments and missed payments, defaults, bill payments, mortgages, hire purchases etc.

Credit reports/credit records: A summary of your credit history, sometimes including a credit rating or score.

Credit score: A number, usually out of 1,000, which is based on your credit history and gives lenders a way to measure your reliability with lending. A score above 700 is considered good.

Credit check: When a lender or other organisation asks about your credit history.

Who checks your credit score

A lender, business or potential employer might ask for a credit check to get a sense of how reliable you are with money. You might be asked for a credit check when applying for loans, credit cards, mortgages, bank accounts, phone contracts, car finance, insurance and rental accomodation.

If the lender or business thinks your credit history makes you seem risky, they might reject your application.

In most cases, the person or business wanting a credit check must get your consent first. Consent is not needed for some organisations and businesses, eg certain public sector agencies, debt collectors.

How to change your credit score

Your credit score goes up and down based on what you do with your money. If you have bad credit, or if you have no credit history at all, there are actions you can take to improve your credit score.

Improve your credit score

  • Make payments on time: This goes for loan repayments and bill payments.
  • Pay credit card in full: Do this every month to build good credit.
  • Check your credit scores: You need to check all three credit reporting companies and make sure the information they have is accurate. Ask for any errors to be fixed. If you are turned down for a loan, check your credit history and fix any errors before applying for more loans. (See credit reporting company details and how to fix errors in your credit report below.)
  • Don't share bills: Make sure your name isn't on any bills with other people, eg if you live with flatmates and the power bill has all of your names on it, your credit score could drop if your flatmates don't pay the bills.
  • Limit credit applications: Every timeyou apply for credit, the lender will do a credit check. Each check negatively impacts your score. Only apply for what you really need.
  • Limit payday loans and quick finance options: Seeing these on your credit history can make lenders think you aren't good with money.
  • Cancel unused credit cards and accounts: Multiple sources of credit don't look good on your credit history. If your credit card/store card isn't getting used, cancel it .
  • Wait for the time limits: Items on your credit history stick around for a set amount of time, four to five years. If you want to apply for new credit, wait until the old history disappears off your credit report, if possible.

No credit is almost as bad as poor credit. It gives a future lender no information about you as a risk, which might lead them to turn you down.

Negative impacts to your credit score

  • Missed payments: This can be everything from loans to bill payments.
  • Defaulting on payments: A default is where a payment over $125 is overdue by more than 30 days and the lender has tried to recover the money. This stays on your credit record even if you repay the amount in full.
  • Insolvency: Filing for one of the three types of insolvency — debt repayment plan (also called summary instalment orders), no-asset procedure or bankruptcy.
  • Applying for too much credit: Applying for multiple sources of credit in a short space of time, eg applying for four credit cards in three months.
  • Multiple credit checks: Many agencies/organisations checking your credit score shows you may be seeking more loans or credit than you can afford.
  • Credit transfers: Shifting debt from one credit card to another.
  • Debt collections: You owe money and your debt has been passed on to a debt collector.
  • Hardship applications: If you applied for hardship with a previous loan, eg repayment holiday.
  • Payday loan and quick finance applications: With their high interest rates, other lenders may consider these a last resort.
  • No credit: Having no credit history means there's no way for future lenders to see if you are a risk or not. This can have the same negative impact as having bad credit.

Payment problems

Example — Wait to get new credit

In her early 20s, Sarah had three credit cards and didn't take the debt seriously. At one stage she was getting letters from debt collectors. She ended up with a bad credit score. Four years later, she has paid off her debts and wants to buy a house. She checks her credit history and sees her credit card defaults will soon disappear.

Sarah waits one more year to apply for a mortgage, which improves her credit score. While she's waiting, she makes sure all her bills get paid on time and her current credit card is paid off in full each month. The bank accepts her mortgage application.

Time limits

There are time limits for how long particular entries stay on your credit history.

Most information stays on your credit history for lenders and organisations to see for four to five years, eg default payments, bankruptcy, hardship.

Some information is kept for two years, eg missed payments.

A default payment is a payment over $125 overdue for more than 30 days, and the lender made efforts to recover the money.

Some information is kept indefinitely including:

  • identification information
  • multiple bankruptcies.

Example — Default payments

Max loses his job for six months. Even though he tries his best, he defaults on some payments. When he gets a new job, he focuses on getting up to date on his default payments. He checks his credit score once he has paid back his debts and sees the default is still there, even though he paid it off. He calls the credit reporting company and is told the credit record shows he paid it off, but the default stays on his record for five years.

How to check your credit record

You can get a free copy of your credit report from these three credit reporting companies:

Get my credit report(external link)  — Centrix

Personal credit alerts and reports(external link)  — Illion

My credit file(external link) — Equifax

They should deal with your request within 20 days. If it takes longer, they must tell you why. If you need your credit record urgently, you may need to pay a fee to get it more quickly.

These companies will often give you a copy of your credit record (a summary of your credit history) but may not give you a credit score — the number given to lenders, landlords and others.

One option to get an approximate credit score is the Credit Simple website. It will give you an idea if your credit score is good or bad. But if you want full details — your credit report and history — go through the three credit reporting companies above.

See your credit score(external link) — Credit Simple

When you apply for a loan or insurance, the company will check your credit with one of these credit reporting companies. It's a good idea to regularly check all three for errors.

Common problems with credit scores

Errors on your credit record

When you check your credit report, keep an eye out for anything you don't recognise or think is wrong. This report impacts many areas of your life, so it's important it's accurate. If you find errors, follow these steps:

  1. Check your credit reports from the other companies.
  2. Report any errors to the credit reporting companies.
  3. If the credit reporting companies won't act, but you think it's a genuine error, you can complain to the Privacy Commissioner.

1. Check credit reports from other companies

There are three credit reporting companies in New Zealand. Lenders and other organisations can go to whichever one they choose to learn about your credit history.

If a report from one credit reporting company shows errors, the others might as well. You need to request a correction from each company that has errors.

2. Report errors to the credit reporting companies

Before you make contact, understand your rights.

Your rights: credit reporting companies must try to make sure the information they hold is correct. These rights are protected under the Privacy Act and the Credit Reporting Privacy Code.


When you complain about errors, the credit reporting company will:

  • check the error with its source to get more information, eg your bank, lender, phone provider
  • highlight the particular item in your report to show you are questioning its accuracy
  • make a decision about the error as soon as possible — if they need more than 20 days, they must tell you why.

Results: If they don't make the correction, they must tell you and explain why. If the correction is made, they must tell you, and tell anyone who has recently asked for your credit report.

3. Complain to the Privacy Commissioner

If the credit reporting company refuses to make a correction you ask for, and you still believe the entry is an error, you can take your complaint to the Privacy Commission.

The Privacy Commissioner will investigate the issue. If a case cannot be settled, it can be taken to the Human Rights Review Tribunal.

Making a complaint(external link)  — Privacy Commissioner

Example — Bank error

Jack has a personal loan with a bank. Even though he meets all his repayments, he receives a default notice on his loan. Due to a processing error, his payments had not been credited to his loan for two months. The bank fixes the problem and adjusts the interest charged. Two years later, Jack applies for a starter home loan. His application is rejected because of the old default listing. Jack contacts the credit reporting company and tells them about the error. They contact the bank and ask them to correct the listing. Jack gets his home loan.

 Identity fraud

If you notice these things in your credit record, you might be the victim of identify fraud:

  • accounts you never applied for
  • defaults you didn't know about
  • credit enquiries you didn't agree to.

These are different from normal errors, as they are usually unconnected to your other credit history, eg accounts with lenders you are not familiar with.

Your rights: If you think you are the victim of identity fraud, you have the right to freeze/suppress your credit information for 10 days. These rights are protected under the Credit Reporting Privacy Code.

If you ask one of the three companies to freeze your history, all three will freeze your history.

Freezing/suppressing is when the credit reporting company cannot give out your credit information. Anyone who asks during this time is told your information is suppressed. This tells them someone else may be applying for credit in your name.

If you want to apply for credit while your information is frozen, you can ask the credit reporting company to give access to a specific person or organisation, eg a potential landlord.

If you think the identity fraud is still happening after 10 days, you can ask for the freeze/suppression to be extended.

For more in-depth information on identity fraud, see the Privacy Commission website.

How can I protect myself from identity fraud(external link) — Privacy Commissioner

Other problems

If you are having any other problems with your credit history, eg someone accessed your report without consent, follow these steps — you might not need to do both:

  1. Contact the credit reporting agency: They should investigate any complaints. Talk to them first.
  2. Complain to the Privacy Commissioner: If you cannot resolve the issue with the credit reporting company, the Privacy Commissioner can help.

1. Contact the credit reporting company

Whatever your problem, contacting or complaining to the reporting company is your first step. Before you make contact, read our information on:

  • your rights
  • how to complain.

Your rights

You have rights — and credit reporting companies have rules to follow — under the Privacy Act and the Credit Reporting Privacy Code.

  • What can be held: Credit reporting companies can hold specific information about you, eg credit accounts, repayment history, default payments, insolvency applications.
  • Time limits: Time limits exist for your credit information, eg four to five years for most information.
  • Who can access it: Only certain agencies and companies can access your report for specific reasons, eg lenders considering your loan application.
  • Consent for access: Your consent is needed in most situations, eg potential landlords or employers, lenders. Some don't need your consent, eg debt collectors.
  • Identity fraud: Ask to have your credit information suppressed if you think you're the victim of identity fraud.
  • You have access: You can ask to see what information is held on you.
  • Errors corrected: You can dispute errors on your credit report.
  • Complaints: You can complain to the credit reporting company if you think your rights have been breached.

How to complain

Credit reporting companies must have an internal complaints process. If they haven't made this clear to you, ask them what it is.

A free financial mentor can help you contact the company, or talk to the company for you. Start by contacting the free helpline MoneyTalks.

Contact information(external link) — MoneyTalks

Before you complain:

  • Gather proof, eg bank statements, credit contracts, emails and letters.
  • Think about what you will say, make notes with points you want to cover.
  • Decide your ideal outcome, egincorrect information removed.

During the complaint:

  • Use the word complaint — make sure it's treated as a complaint and not as feedback.
  • Take notes — include dates and what was said. If you need to take your complaint to the Privacy Commissioner, this will be helpful proof.
  • Stick to the facts — explain the problem and share any proof you collected.
  • Say what you want — explain your ideal outcome.
  • Take time out — if it gets heated, or you want to think about their response, arrange a time to call or email back. Explain you need time to digest the conversation.

2. Privacy Commissioner

If you’re unable to resolve a privacy dispute, you can complain to the Privacy Commissioner.

Making a complaint(external link)  — Privacy Commissioner

More help

Get support at any point from:

  • Citizens Advice Bureau (CAB): A free, independent service, run by volunteers. CAB can advise you on your consumer rights and obligations, in person, by phone, or online.

A CAB near you(external link)  — Citizens Advice Bureau

  • MoneyTalks: This helpline gives free budgeting advice to individuals, family and whānau. Financial mentors can help you understand your financial situation, organise your debt and plan for the future. They can also put you in touch with a local budgeting service and help with issues you're having with lenders. Phone 0800 345 123, or use live chat, email or text, if you prefer.

Contact information(external link) — MoneyTalks