Check your own credit score

People will have free access to the credit scores being allocated to them by credit reporting agency Veda Advantage.

Veda has caused a stir by announcing that from next month every New Zealander on its books will have a credit score from minus 330 through to plus 1000.

A person with a score of less than 100 will have difficulty obtaining credit, 500 to 600 will be average, and anyone with a score of 700 and above will be considered a good credit risk.

The information will be based on their existing credit profiles, and under the law anyone can ask for a free copy of their file annually. From August 2 this will include the new scores.

John Roberts, Veda's New Zealand and international managing director, emphasised the only new factor built into the scoring system was an automatic driver's licence check to help counter rising levels of identity fraud.

But he said the system had been set up in anticipation of a move to what is known as positive or comprehensive credit reporting, whereby fuller details of a person's financial circumstances can be accessed by potential creditors.

At the moment only "negative" information is available, such as whether the person has ever defaulted on bill payments or been bankrupted.

The Office of the Privacy Commissioner is conducting a review into whether this country should move to positive reporting.

New Zealand and Australia are two of the few countries worldwide to retain a negative system.

Mr Roberts said negative reporting was an "archaic" system that penalised people if they had made the odd mistake. "What we're trying to do is drag [the system] kicking and screaming into the 21st century."

The national president of the Credit and Finance Institute, David Young, said the credit market had taken a battering of late and anything that gave people confidence to extend credit was a good thing.

He said that whereas large organisations had their own credit-scoring systems, small business operators did not necessarily have the skills to make an accurate assessment of someone's creditworthiness based on the raw data. "What they're getting here is a tool that will enable them to do that assessment."

For example, he had recently looked at a credit report where the person had five district court judgments against them, had defaulted 25 times and had applied for credit 32 times in the past two years. "There's a whole raft of information that I can interpret out of that quickly and decisively."

But John Scott, New Zealand head of rival reporting agency Dun & Bradstreet, said he did not see the commercial advantage of a consumer credit score.

Few small businesses extended credit directly to consumers.

He said what was more important was the quality of the data being fed into any credit reporting model.

Dun & Bradstreet supported an initial limited move to positive reporting, allowing information such as whether previous applications for credit had been approved, who the lender was and the extent of the credit.

Overseas credit reports contained details about a person's income, the size of their mortgages and credit card balances, but New Zealanders were "not ready to go all that way".

"No other other country apart from Colombia has moved from a negative to a full positive file."

Consumer magazine editor-in-chief David Naulls said the Consumers Institute did not have a problem with the new scoring system because it was based on existing information.

It cautiously supported a move to positive credit reporting because it could potentially bring costs down as financial institutions were able to make better lending decisions.

It might also aid those without much of a credit history. "Groups who haven't always accessed credit might find it easier in a positive system."

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