Taking control / July 2021
Lenders dive into your financial records to take a close look at your credit ratings, income, expenditures, previous/current loan repayments, and the number of times you have gone into overdraft. They investigate your spending habits to see if you have a gambling addiction or a tendency to go above what your budget can afford.
Another thing that lenders evaluate is how steady your income is, and how stable your employment is. Banks and loan companies can check for any credit defaults and bankruptcies, and they look at any recent applications made for new debt as well as your credit utilisation. Overuse of credit can indicate a risky client.
Your credit score is primarily calculated from metrics such as payment history, your debt, the length of your credit history, types of accounts you have, and your recent credit activity. A good credit history makes all the difference as to whether lenders decide to choose you.
Payment history is mainly evaluated by your ability to meet payment deadlines—how often you missed payments and how long you were overdue. Debt is evaluated by the amount of money you owe and the proportion of money owed compared to how much credit you have available.
It can understandably create a strange and uneasy feeling when you have to provide lenders with your personal financial information, being uncomfortably aware that they have full knowledge of what restaurant you ate at last weekend, and how much money you’ve spent.
Thankfully, your credit information is protected by New Zealand privacy laws, and a breach of trust can result in a case being brought to the Human Rights Review Tribunal where fines typically range between $5,000 to $50,000. The largest fine ever issued by the Tribunal was over $168,000 — imposed on NZ Credit Union Baywide in 2015.
The Responsible Lending Code was established by the Credit Contracts and Consumer Finance Act 2003 to “elaborate on the lender responsibility principles…” and “offer guidance on how those principles may be implemented by lenders”. It outlines principles regarding the rights of borrowers and the responsibilities of creditors.
Responsibility principles of lenders include not exercising power conferred by the agreement in an “oppressive manner”, and making reasonable inquiries before entering into an agreement to ensure that the borrower will make payments without “…suffering substantial hardship”.
MoneyShop has been helping Kiwis with their finances since 1993, with four branches in Auckland (Otahuhu, Manukau, Henderson, Takanini and Waipapa) and one in Northland. During this time, we’ve made it our priority to stick well within the Responsible Lending Code, and we’re proud of our reputation as an ethical lender.