Of the 3.8 million consumer credit files held by credit reference agency Veda, 24 per cent have adverse information on them, including defaults and bankruptcies.
Your credit history includes any payments that have been overdue for more than 30 days where the lender has taken steps to recover the money.
A default stays on your credit file for five years, even if you have repaid the debt in full.
But a new comprehensive reporting regime will reward people who are managing their money well.
It will show things such as loans and the payments being made against them.
If you are up to date with a personal loan it will have a positive effect on your credit history.
The transition to the new regime started in 2012 but it has been slow going as lenders and utility companies have had to change their processes to record positive, as well as negative, credit information.
Dennis Martin, managing director at Dun & Bradstreet, said that if someone had a loan that had been in default but was paying it off the lender would now record that arrangement and others would look on the debt more favourably.
That meant it was even more important to keep up to date with current bills so that they showed up as being paid. "A default five years ago is not as relevant as someone who has been a late payer in the past 18 months."
John Roberts, Veda managing director, agrees that comprehensive reporting will make rehabilitation easier.
"Now that the code has been changed to allow positive credit reporting, new data will be loaded on to people's credit files.
"The most dynamic data sets will be current credit limits the person has with different credit providers, and their payment history."
He said credit providers who gave public notice to their customers that they were going to offer positive information from April 2012, when the rules changed, would now have the ability to backload up to 24 months of payment history.
"This in itself could demonstrate rehabilitation."
If, for example, someone had a one-off default on their file that was three years old, but a good payment history since then, most credit providers would consider the person a low risk.
Martin said people should be careful about who they let run a credit check on them.
"If you're shopping around for the best deal, don't get to the stage where they do a credit check.
"You should at least not consent to a credit check unless you're really serious, because more inquiries over a short period can impact your credit file."
It could look like the credit checks had come back negative, he said, or that the person had a lot of credit.
Tips for better credit
• Don't allow anyone to do a credit check on you unless you're really sure you want their services. Checks make lenders wary.
• Make payments. Even if you're behind, the lender can record that you are paying off a debt.
• Pay on time. Being a habitual late payer can affect your credit score.
• Make sure government agencies have the right address. Unpaid fines are recorded, even if sent to the wrong address.
• Check your credit record and amend anything that is incorrect.
Payback proves a long haul
Christchurch mother Kim Bryce is still dealing with the fallout of years of overspending.
"I was young and silly and ticked up far too much and ended up not being able to pay everything."
The 31-year-old amassed $5,000 in debt on hire purchase agreements, overdrafts and even gym memberships.
"It pretty much started 12 years ago and got worse and worse until four years ago.
"It's a horrible cycle."
The debt went to Baycorp and she is slowly paying it off.
It is now less than $2,000 but it still stops her from getting more credit.
She said the long-term effects were hitting home now she had started a family — her son, Jamie, was born in June.
"It can affect renting a house and my partner and I are unable to buy a house because of it."
Bryce hopes to start a dog-grooming business from home.
She'd like other people to learn from her mistakes and try to save money to buy the things they want rather than racking up debt. "In this day and age you can tick it up so much more easily."
Under the comprehensive reporting system, Bryce's payments on her debt will be obvious to other lenders but it will take five years for the default to be cleared completely once it is paid off in full.
"Bad credit has, in its own way, helped as I couldn't get into more debt. It's just not so good now that we would like to buy a house."
