Late last year NZ introduced credit scoring for the first time. Before that, credit reports merely consisted of basic information about a person, along with listing credit enquiries and any defaults. Pretty boring stuff.
Like a total geek, I was itching to find out what mine was. And I have to admit, I was a little disappointed.
First, let me point you to the totally unhelpful Veda page, which attempts to explain the scoring system. (This is more or less what the informational brochure enclosed with our reports contained). The diagram almost implies that 600 is an average kind of score, although I’m not sure if that’s the message they meant to convey.
One thing to note on the report is the factors which affect scores.
- Defaults
- Insolvencies
- Individual credit shopping pattern
- Age of credit file
- Demographic stability
See that last one? Yeah, that one that has absolutely nothing to do with ME. I can understand lumping all drivers under the age of 21 into one group for insurance purposes, but for credit reporting?
Anyway. I am slightly annoyed that I come in at just under 600 on my Veda score (588 to be precise). I can only assume (aside from being classed in a young, risky age group) this is due to the short length of my credit history, and perhaps the number of credit inquiries? I have nine all up: two from my internet providers, one work related one, one from another bank and the rest are all from my bank. Obviously they’ve been checking up on me without my knowledge.
I wonder if my available credit and use of overdraft also contribute to the score. It’s not very clear to me exactly what gets reported. I know that prior to the introduction of the score, hardly anything at all was reported unless you went into default on an account. You guys in the US have all kinds of crazy criteria for this with your available credit ratio at any given time, but I highly doubt we’ve advanced to that stage yet. According to this article, credit agencies can only collect information on credit defaults, judgements and bankruptcies – data considered to give only a “negative” picture of someone’s credit history.
As for T, his file is six months older than mine, he has slightly fewer enquiries and his one small default brings him in at 485 – just in the yellow zone, as opposed to the green.
1000 seems so far away. But realistically, I have no need for credit, and I believe a perfect score is unnecessary. I think scoring is a positive move; I guess I’m just peeved that I barely made it into the green zone on the spectrum, especially after seeing a commenter on Lady in the Red had a 900 plus!
Nobody really understands how credit reporting works. Ahaha.
I wouldn’t worry about the credit inquiries though. Those are considered “soft dings” in Canada, and here they don’t really effect the score. 9 doesn’t seem to be a ridiculous number, so don’t swear it.
Credit cards are an easy way to build credit, when used (im?)properly. I used to buy my groceries on my credit card, and then go home and transfer the money from my chequing account.
In addition to a perfect score being unnecessary, remember that it’s probably impossible (unless you’re a millionaire.)
Your credit score is only going to effect your ability to get more credit. You’re too young to be stressing about this right now!
Credit scores (especially the newer -i.e. cloaked in mystery- types) make me crazy. Credit bureaus are constantly mucking around with their scoring systems to try and stay “ahead” of consumers, but really, they are just trying to sell a product to lenders. I generally think the newer credit scoring models can’t really reliably predict ANYTHING, and the ones that say they can are somewhat suspect. The scoring models that have been around for more than a decade or so are a different matter, but still… The report (and the individual behind the report) are what matter most.
At any rate, I wouldn’t worry too much. It’s almost impossible to have a really high credit score in your early twenties, no matter what scoring model is being used.
@ Melissa
I use my CC for everything I can – I’m not sure NZ at this stage takes CC use into account (as I said: credit agencies can only collect information on credit defaults, judgements and bankruptcies).
Veda is actually pretty good, we work with them closely, ie I have one of there guys in my office weekly.
I think it’s important to realise why a credit history actually is. It’s not a statement of your financial position. Good credit doesn’t equal being good with money. A credit history is a way of scoring someone’s chances of paying back a debt.
A 50 year old married woman who’s had a $10,000 credit card maxed out forever and always had a car. Bought everthying on buy now pay latter and never paid down the mortgage is actually a good candidate for lending. She’s terrible with money but she always pays her debts on time and she’s stable.
Age unfortunately is a big one, as is marital status, stability of employment, and stability of address.
Hope that helps it’s not that your bad with money, it’s just not what credit scoring is designed to measure.
PS: Australia is about to introduce the same thing