5 Things That Hurt Your Credit Score In NZ

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23 Jul 5 Things That Hurt Your Credit Score In NZ

A bad credit score can impact your ability to secure future credit. There are a few reasons why you may have ended up with a bad credit score: failing to pay bills on time; applying for credit too often; and even a default on someone else’s loan if your name is attached to the credit application. Let’s take a closer look at five of the most common things that hurt a credit score in New Zealand, and how to improve a credit score.

1. Defaulting on a payment

Late repayments or missed payments on a credit card or loan, a utility charge or phone bill could result in a default. Defaults occur when payments are at least 30 days overdue on amounts of $100 or more. To recover the money owing, the credit provider may hand over the debt to a debt collector, or report the default to a credit reporting bureau which will list the default on your credit report.

Defaults could remain on your credit report for five years and have a significant impact on your ability to secure other forms of borrowing. And even if you are successful in future credit applications, you may not be offered the best deals, or you could be charged a higher interest rate.

It’s important you make every effort to repay any defaults, and work at building a positive credit history in the meantime. Although a default on your credit file can be an issue, paid defaults are generally viewed less negatively than unpaid or written off defaults. If you’re struggling with multiple debts and juggling which bill to pay next and how much, or wish to pay off those defaults, we at Max Loans may be able to help you take the stress out by consolidating your debts into one easy to manage loan with an overall lower interest rate, reducing your monthly repayments or helping you get debt-free faster. For more information about debt consolidation loans, email us or talk to one of our friendly and experienced Personal Lending Advisers on 0508 629 5626.

2. Too many credit enquiries

Maintaining a good credit score isn’t just about paying your bills on time. How often you apply for credit can impact your credit score too. Every time you apply for credit, lenders or credit providers access your credit report to verify your credit score. This is called a “hard inquiry” and negatively effects a credit score. Lenders view too many hard inquiries in a short space of time as a sign of credit distress and a higher risk.

To avoid too many hard inquiries, only apply for credit when you really need it, and be aware that each application could result in a hard inquiry. To ensure your best chance of success, work with a Max Loans’ Personal Lending Adviser. As a specialist when it comes to NZ Loans, the team at Max Loans can help determine which lending option is right for you and help you avoid unnecessary credit checks. In fact, we’ve helped many customers secure finance with credit issues. We understand that being unable to get a loan due to an impaired credit history can be frustrating, and we work with a broad range of lenders who specialise in this type of lending to help you get a loan that fits your financial situation and needs. Not only does a bad credit loan through us provide you with the much needed funds, but it also comes with fair rates and flexible repayment terms, ensuring your long-term financial wellness. By paying off a bad credit loan with us, you can also rebuild your credit score over time, putting you in a better position to qualify for credit or better terms in the future. To apply for a bad credit loan, simply fill in our online loan application form in minutes and your Personal Lending Adviser will be in touch to discuss your options.

3. Bankruptcy or insolvency issues

Any insolvency procedure will negatively impact your credit rating, and that could make it difficult to apply for any form of borrowing. Insolvency information, including record of entry into No Asset Procedure and single bankruptcy, may be held on your credit record for four years.

Similarly if you’ve applied for hardship assistance with a previous loan – for example, a mortgage repayment holiday – your credit score could be affected and you’ll need to work at improving your credit score over time, with an excellent credit spending and repayment history.

4. Defaulting on a joint obligation

Sharing a flat often means sharing expenses like electricity, phone or internet. Any time your name is listed on a shared credit agreement, you share responsibility for repaying the debt on time and in full. And if any of these payments are late or missed, your credit score could suffer.

In the same way, if you share a joint account with a partner, or if you’ve applied for credit on behalf of someone else as a guarantor, your credit score will be impacted if they default on a repayment. To avoid impacting your credit score with defaults that are out of your control, keep your finances apart if you are sharing a flat, and ensure your name is removed from any joint accounts when you move out.

5. Little or no credit history

Having no credit history can make it hard to apply for credit. That’s often the challenge facing younger borrowers or those who have never had a credit card, car finance or even a student loan. However, it is possible to improve your credit score over time. Some simple ways to do this include applying for a credit card or personal loan, and repaying your debt on time.

Improve your credit score

A bad credit score doesn’t necessarily mean the end of your borrowing. It could just mean a finetuning of your finances until your credit score improves. To start with, we recommend you review your credit report each year and check for any errors or inconsistencies. Pay back any outstanding debt and limit any new credit applications. And if you’ve defaulted, make a real effort to repay this debt as a first priority.

If you need some extra funds to meet your financial needs and goals, talk to the team at Max Loans about your options for a bad credit loan – or any other financial solution – which will also help you improve your credit score over time and get back on track financially.

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