All Kiwis to be rated for credit reliability

The scores will thwart fraud and stop untrustworthy people getting loans. Photo / Kenny Rodger

All New Zealanders are to be assessed for creditworthiness under a new system the country's biggest credit agency is launching.

Veda Advantage plans to give Kiwis a score from minus 330 to plus 1000.

Most people will rate above zero but anyone with a score of less than 100 will find it difficult to obtain credit from a bank or finance company.

The average score will be in the range of 500 to 600, and a person with a score of 700 will generally be considered a good credit risk.

The scoring is worked out from a person's credit report, which contains information about how many times they have applied for credit and whether they have defaulted on debts or been bankrupted.

Veda's managing director for New Zealand and international, John Roberts, said the system, to start on August 2, would primarily help the agency's smaller business clients.

While large organisations took raw credit data and produced their own scoring systems, small to medium-sized enterprises (SMEs) did not tend to be that sophisticated and had asked for a way of more simply interpreting the data, he said.

In addition, SMEs had been complaining about increasing levels of identity fraud and people trying to obtain credit fraudulently.

The new system therefore had a driver's licence check built into it to make sure the person was who they said they were, Mr Roberts said.

A scoring system would also become more relevant if New Zealand, like the rest of the OECD, moved to what's known as comprehensive credit reporting, whereby fuller details of a person's financial circumstances can be made known to a prospective creditor.

The credit industry wants access to information such as whether credit applications were approved, what type they were, who the loan was with, what the credit limit was and whether the account is still open.

The office of Privacy Commissioner Marie Shroff is conducting a review of credit reporting and is currently watching to see which way Australia moves on the issue.

John Scott, NZ chief of credit-reporting agency Dun & Bradstreet, told the Herald in February that a more detailed positive credit-reporting system would prevent people who were overstretched from being given more credit. It would also better reward those who had a good credit history.

Lenders would be able to make a more informed decision on whether to lend people money, Mr Scott said. "It stops the credit surfing that is going on where people get themselves deeper and deeper in trouble."

Dr Michael Turner, president of an American non-profit think-tank specialising in credit reporting, said the move to more detailed credit reporting created a short-term "valley of transition" when the availability of credit contracted.

But changing the system would eventually stimulate the economy with better access to affordable credit.

Veda, which also operates in Australia, says it provides "insights into more than 16.5 million credit-active individuals and 4.4 million companies and businesses".

Consumer Affairs Minister Heather Roy was not available for comment last night.

* The credit scoreboard

Veda Advantage's credit score system.

200 and under: Applies for credit repeatedly with multiple lenders, applies for high-risk products, likely to have defaults or judgments.

201 to 432: Applies for credit often with multiple lenders, applies for high-risk products, moves address often, unlikely to have judgments or unpaid defaults.

433 to 591: Applies for credit sometimes, mix of product types, loyal to a few lenders, occasionally moves address, no judgments or defaults.

592 and over: Rarely applies for credit, unlikely to have high-risk products, loyal to select prime lenders, rarely moves address, no judgments or defaults.