Peeping at your credit rating

By JANINE OGIER

Reality TV means the phrase "Big Brother is watching" has taken on a different meaning from what George Orwell ever imagined.

But many New Zealanders are unaware that someone really is watching - the large and pervasive industry devoted to collecting information about their sensitive financial affairs.

The personal credit information industry is big business; dominant player Baycorp Advantage says it holds records on 2.5 million New Zealanders, while its competitor D&B says its figures are similar.

Some of those records show nothing more than your name, date of birth and address.

But if you have applied for a loan, mortgage or hire purchase finance in the past five years, there'll be stacks more information on your credit file because you're defined as "credit active".

You may not have noticed when you signed the loan application, but in the small print you gave permission for your file to be searched, and for the computers making the check to update that file with information from your current application.

And for the record, there's no degree of credit default - you're a defaulter whether the amount was the minimum $20 or a sum many times larger.

There's a genuine business need for such data to be stored so credit providers such as banks, power companies and retailers can check how creditworthy a potential borrower is. The justification for pooling of credit data is that past behaviour is a useful indicator when measuring credit risk.

But problems surface when incorrect information affects people's ability to get credit.

David Russell, chief executive of the Consumers' Institute, says the first time people learn that they have a bad credit rating is when they get turned down for a loan or hire purchase.

"That is the signal that they should start checking and asking where the information came from," he says.

If the query leads to a credit reporting agency, then make an application to see the information so you find out what the bad debt record is. To do that you'll need to provide your name, address, date of birth and some identification.

If the information is wrong, insist that it is corrected, Russell says.

"If there is any argument made, or dispute or refusal or equivocation on the part of the credit rating agency then head off to the Privacy Commissioner," he says.

Privacy Commissioner Marie Shroff urges consumers to go to the supplier of the information first and make full use of their complaints process.

If that doesn't fix the problem, her team of lawyers can investigate and mediate. They look at both sides of the issue and give an opinion on resolving it.

"Usually we are able to reach a resolution," Shroff says. "Quite often the agency will apologise, for example, and the person will be satisfied with that. They may have accidentally breached privacy or accidentally released some information or held some inaccurate information."

If the disagreement continues, or the Privacy Commissioner decides against you, then you can take the complaint further, to the Human Rights Review Tribunal.

Problems the Consumers' Institute hears of usually relate to cases of mistaken identity. People with the same name but a different address or a different name and the same address get mixed up in the records.

"That sort of thing should be put straight immediately," Russell says.

"It's a major problem for those involved. If you get turned down for a loan, then you have to go through all this hassle of establishing that it is a mistaken identity or that you have already paid off the debt which has given rise to this bad record in the first place."

It takes time and effort to resolve.

And just correcting the error may not be enough; if a mistake is identified, says Russell, you have to impress on the credit agency that they let everyone who has accessed your credit rating know there was an error.

Baycorp Advantage ranks sixth in the Privacy Commissioner's list of organisations complained about for 2002-03. The office received 26 complaints about the company and it was the only private sector agency in the top nine. Most complaints are about Government agencies such as the police and ACC.

Baycorp Advantage spokesman Adam Cooke says a few thousand consumers make a complaint to the company each year.

For a credit default or overdue account to be removed from a person's file, Baycorp Advantage and D&B need their client, the credit provider, to be satisfied a mistake was made.

So when disputes occur, you need to contact the credit reporter involved and ask for an investigation to be set up, then you have to sort the problem out with the credit provider. Get copies of the disputed statement or relevant bill and work from there.

If a dispute isn't resolved, an individual has the right to have a "statement of correction" placed on their credit file to show they disagree. This means the next time the file is accessed it's clear you contest some of the negative details.

There is no registration or licensing of credit reporters in New Zealand and no specific laws regulating the industry.

The Privacy Act 1993 enshrined privacy principles in law. For example, it enabled individuals to access information held about them by a credit reporter and to seek correction.

But continual difficulties with this aspect of the industry has led the Privacy Commissioner to propose a code of practice.

"We don't believe that a lot of people are aware of how much information is held on them. Also do people know they can check it, and even if they do know that, do they check it?" Shroff says.

The code was to be introduced mid-year but progress now depends on the outcome of formal submissions this month.

One major change in the proposed code is the removal of charges for consumers checking their information.

Baycorp Advantage charges $15, but when D&B branched into consumer credit reporting in 2002, after specialising in commercial credit reporting for 100 years, it introduced free reports for people who were prepared to wait a week to receive the information. It you want it fast, D&B charges $25.

The code would allow credit reporters two weeks to give you a free copy, with a charge if you want it sooner.

If a credit report is obtained by a credit provider, the code requires them to tell you that you can have a copy of the credit report free of charge.

"Removing charges as a barrier to access will facilitate one of the prime means of improving accuracy, which is to encourage individuals to check their credit report from time to time and bring any inaccuracy to the attention of the credit reporter," Shroff says.

The code proposes a time limit of five years for most information to be kept by a credit agency. The exception is bankruptcy information, which can be held for seven years.


The code also sets out what information may be collected by credit reporters, the uses to which it can be put, and rules and restrictions for access by the people reported on and others.

People can't really control access to the information held by credit reporters because, while individual authorisation is always required in order to obtain a credit check, if you decline, it's likely the credit provider will reject your application.


Many New Zealanders are on credit reporting databases without being fully aware of the fact. Those who know they are on a database will typically be unaware of the exact information that is held on them.

The new rules require security safeguards explicitly to be taken against misuse by those with authorised access to the databases. Steps include monitoring usage and regularly auditing compliance.

CONCERNS Trends in the credit reporting industry that concern Privacy Commissioner Marie Shroffinclude:

The desire to amass ever more detailed personal information.

More frequent access by a widening range of users.

The use of credit information for purposes that are not strictly credit-related.

Want more information about your credit file?

Go to Baycorp Advantage or D&B