Many people do not understand the long-term effects of not paying their bills. Some companies refer unpaid accounts to a debt collection agency who collects the unpaid account on their behalf.
The debt collection agency passes this information on to a company who specialises in holding information on people's past credit
history.
You can go to www.mycreditfile.co.nz and download a form that you post in to this company to request ) what is held on your credit history for free (as long as you are prepared to wait 10 days).
It also gives some interesting information about protection from identity theft.
When you request credit from a store or finance company these organisations contact an information company to find out what sort of credit risk you are.
If you want to borrow money in the future, the long-term effect of having an amount referred to a collection agency could be that you have to pay more to borrow money than someone with a good credit history.
This is because you are more of a risk to the lender.
You could also be declined for something important such as a home or a business.
Even when goods have been repossessed and sold to help offset debts, the person who took out the loan originally is still liable to pay the outstanding balance.
Sylvia Bowden is the author of How To Stop Your Kids Going Broke which is available from www.silbo.co.nz. She is also the author of the New Zealand Household Budget Kit which is sold at major bookshops and her website.
