When I was a teenager and still at school I bought a Cry Baby Wah Pedal for my guitar from a department store. It was probably a couple of hundred dollars and I was earning about $30 a week giving guitar lessons after school, so I had to pay for it on hire purchase. What’s a Wah Pedal? If you really don’t know, check out this demo of the unit I bought on YouTube and think Jimi Hendrix.
Unfortunately it was faulty, and I had to get on the bus, go into the city and take it back under warranty. They told me they didn’t have any replacements in stock and they would have to send it away.
To cut a long story short, something went wrong with their paperwork, I never got a replacement pedal or a repaired pedal. I went in a couple of times (a 45-minute bus ride each way) but couldn’t get any sense out of them and in the end, I gave up on it, didn’t pay for it, because I didn’t have it and totally forgot about it, other than never going back to that chain again.
Little did I know that therefore I got a bad mark against my credit rating and next time I went to buy something on Hire Purchase several years later, my loan request was turned down. It took quite a while to work out what it was about, and you can imagine how frustrated I was.
It wasn’t my fault, it was their mistake. I lost my deposit, didn’t have the pedal and got a bad mark against my credit history and couldn’t buy the Dobro guitar I wanted on finance.
I had done nothing wrong, but I was now seen as a credit risk.
There are several scenarios where people may have to or want to check your credit rating, it may be for a purchase, a loan, it may be when you are shortlisted for a job, it could be when you are renting or buying a house.
In each country there are ways to find out what your credit rating is. One thing you need to know is that each time someone requests a rating on you it is registered and becomes a statistic, even if your rating is good. People checking can see how often other people have checked your rating.
What you don’t want is any nasty surprises when it counts. A simple error became a major annoyance to me but could be much worse if its something like a car that you need to be able to get a job, or you are about to rent your first home.
Maybe you have never even had credit. I’ve always maintained it’s good if you can get interest free finance, to do so occasionally even if you don’t need it and then pay it off, always making the payments before the due date. You could even put the money into a savings account, collect interest and make direct payments automatically, so you don’t have to think about it.
Where do you go to get a FREE Credit Check?
In New Zealand, there are three agencies which are required by law to provide you with your credit rating for free. They are Illion, Centrix and Equifax. All these sites have information about how to get your report and other useful information about finance, budgets and loans.
This list isn’t exclusive, there are more. I just wanted to give you some options.
These sites all have useful tips about borrowing money, and tools like calculators to help you get an idea on what you can afford. You will find more information about buying a house on my blog at www.SoLoMoConsulting.com. This includes other things you need to think about. The mortgage repayments are just one of the costs you need to consider.
What about a Credit Score and What Is It?
There is your credit rating and an internationally recognized formula called your Credit Score. This is a 3-digit number that is based on analysis of your credit history. Lenders will use this to predict whether you will be able to repay your loan on time or not. Credit Scores are used by many organizations who may be taking a ‘risk’ on providing you with money or services. It includes everything from credit card companies, banks, insurance companies, utility and telecommunications companies and in some cases as I mentioned above, potential employers.
Even if you aren’t planning to buy a house in the next year or two, you want to know that when you do go to a mortgage lender that your financial ‘house’ is in order. You need to know that there aren’t any misunderstandings or little problems that can trip you up just when you have found that perfect house. Get it sorted when you don’t need it. If there is anything inaccurate in your information, you have the right to get it set straight.
I do also think it is a good idea to use credit occasionally even if you don’t need it. If you have never had any debt, how can anyone know whether you can pay it back or not? Don’t think about paying your electricity or gas as giving you a good record. They know you must pay those bills, so its not going to help much, but it could go against you if you haven’t been able to pay them on time.
If you’re score needs improving, do it now, not when you want a loan
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