Credit scoring is a widely accepted means internationally of assessing a person’s credit worthiness. It is used by lenders not only to assess whether lending should be approved but also what limit should be put on the amount of credit. Depending on which country you live in, credit scoring can be done on either a negative reporting basis (reporting only negative events such as missed payments) or a comprehensive basis (which also includes reporting on good events such as a track record of not missing payments). In the US, borrowers are given a credit score; the most common one being a FICO score which is used to determine the likelihood of a borrower defaulting. Data for the scores most often comes from lenders and debt collection agencies, who share information amongst themselves. In some cases, credit scoring can disadvantage those who save hard and never borrow; simply because they can’t demonstrate a track record of borrowing and repaying on time.
In New Zealand, Veda Advantage has been calculating VedaScore Ratings since 2009. Everyone on their books is given a rating between minus 330 and 1000. From 1 April, 2012 there will be a change in how credit information is collected which brings us more into line with other countries. The key difference is that credit rating companies will now be able to hold comprehensive information on people, that is, both positive and negative information. Access will be given to permitted users who contribute to the database, including banks, finance companies, insurance companies, phone and power companies. Positive information can include: the type of credit you have, who it is with, your credit limit and your 24 month repayment history. Everybody is entitled to request information on their credit rating. Click here to get your free credit file from Veda Advantage.