Squeaky clean record is best

By DIANA CLEMENT

It's hard to over-emphasise the importance of keeping your credit record clean. Make one wrong move and your life could be marred.

You may have trouble getting credit cards, loans, mortgages, mobile phone contracts and even a job.

Virtually every adult in New Zealand has a credit record and most have no idea what information is held about them.

For an employer or lender to see your credit record, you need to agree in writing. But, sometimes, this detail is hidden in the small print of lenders' agreements.

Recruiters tend to be more up front. Some employment agencies routinely credit check every candidate. Others such as Robert Walters do it only if employers ask for it.

That means they can see details of any defaults or bankruptcies you have had. If you're going for a financial job, one default could mean the difference between getting the interview or not.

Robert Walters managing director Richard Manthel says it is as important for candidates to keep their credit record as squeaky clean as their police record.

Recruitment agency Hudson's human resources director, Jennifer Blight, says some companies, particularly in the financial sector, have strict rules barring anyone with impaired credit from jobs.

It can be difficult for recruitment agencies to place credit-impaired candidates where they will have company credit cards.

The Privacy Commissioner, who is concerned about the use of credit records for anything other than the provision of credit, is looking to tighten the rules with a new Credit Information Privacy Code.

Your credit record is held by two private companies: Baycorp Advantage and Dun & Bradstreet. It will contain your name, birth date, address, possibly driver's licence details, credit defaults, bankruptcy and some court judg ments.

Every time a lender searches your file, a footprint is left. It won't show if the credit was accepted or denied and the level of outstanding debt. But repeated searches from shuffling your credit card deck too often doesn't look good on your credit record.

The credit record alone doesn't determine if you'll get credit. Each lender has its own method of scoring.

The BNZ, like many lenders, uses Baycorp's credit records as part of an in-house scoring system, which also includes income levels and past account behaviour.

Mark Wilkshire, BNZ's chief operating officer credit cards, says about 2 per cent of credit applications fail because of a poor credit record.

Many lenders have direct computer access to the credit records on Baycorp and if you apply online you could be credit checked and declined - without a human ever casting an eye over your application.

A poor credit record doesn't preclude you from getting credit. But it may mean you could pay over the odds - sometimes as high as 20 or 30 per cent interest. Companies such as Bluestone Mortgages and Fastloan specialise in this market.

John Grant, of Wizard Home Loans, says a surprisingly high proportion of New Zealanders have blemishes on their credit records, ranging from failure to pay the old broadcasting licence fee to late payment to the Inland Revenue. "It is very seldom these days where we cannot find a solution even for people with bankruptcies," Grant says.

You can apply to Baycorp and Dun & Bradstreet to see your record.

Baycorp charges $15 and $25 a year for its My Credit Monitor. You'll get an email every time a company accesses your credit file or an addition or change is made. Three hundred consumers a month apply for their Baycorp credit record, says its group marketing and communications manager, Adam Cooke.

Dun & Bradstreet doesn't charge for a copy of your file if you will wait seven days for it.

But the The Consumers' Institute argues that the information on consumers' credit records is theirs and access should be free.

The institute's chief executive, David Russell, says mistakes do crop up on credit records. The institute and Privacy Commission receive complaints from consumers every year.

Baycorp and Dun & Bradstreet won't change something on your file if the lender doesn't agree it's wrong or if it simply looks bad.

If consumers dispute the records, Baycorp will investigate with the lender. But once the company reaches a conclusion, your only option is to complain to the Privacy Commissioner, Banking Ombudsman or other Government body such as the Inland Revenue Complaints Management Service.

It's best to try to clear defaults as soon as you can. A $10 default can be as damaging as a large one. If you can show an employer or lender that you've worked to clear the debt, the likelihood is you'll be given a second chance. But if it's outstanding years after the event, you'll do yourself no favours.

The adage "time heals" is true with credit records. Defaults are wiped after five years and bankruptcies after 10 years. So you can start afresh.

New Zealand uses a "negative" reporting system where only a limited amount of negative information such as defaults and bankruptcies are recorded on your account. Countries with "positive" reporting systems such as the United States and Britain keep payment records and details of all outstanding credit. Consumers in those countries can point to good repayment records after a default to show they have mended their ways.

Critics of the New Zealand system of "negative" reporting include Mastercard, Dun & Bradstreet and the Consumers' Institute.

Mastercard's country manager for New Zealand, Bob Whiddon, says consumers in countries with positive credit reporting systems are less likely to get credit they can't afford and subsequently default because lenders can see from their records if they are "maxed out".

He said when Hong Kong moved to positive reporting, bankruptcy and suicide rates fell.

* Diana Clement is an Auckland-based freelance writer