What’s a Bad Credit Score?

Understanding what counts as “bad credit” and how it affects your borrowing options.

Your credit score plays a crucial role in your financial life. It affects your ability to borrow money, the interest rates you’ll get, and sometimes even your ability to rent a home. But what exactly is a “bad” credit score? And what does it mean for everyday Kiwis?

Let’s break down what credit scores mean in New Zealand and how you can tell if yours needs improvement.

What Is a Credit Score?

A credit score is a number that summarises your creditworthiness — in simple terms, how likely you are to repay debt. In New Zealand, credit scores typically range from 0 to 1,000 or 0 to 1,200, depending on the credit reporting agency:

• Centrix: Score range 0 – 1,000

• Equifax: Score range 0 – 1,200

• illion: Score range 0 – 1,000

The higher your score, the better your credit history looks to lenders.

What Is Considered a Bad Credit Score in NZ?

Each agency defines “bad” differently, but here’s a general guide:

A score below 500 usually means you’ll struggle to get loans from banks and may have to look at alternative finance options with higher interest.

What Causes a Bad Credit Score?

Bad credit can be the result of:

• Missed or late bill payments

• Defaults on loans

• Court judgments

• Too many credit inquiries in a short time

• Bankruptcy or insolvency

Even small debts can impact your score if unpaid or handed to a debt collector.

Why Does Bad Credit Matter?

When you apply for:

• Car loans

• Credit cards

• Home loans

• Phone or internet contracts

• Rental properties

Your credit score is used to judge your reliability. A bad score may lead to loan rejections, higher interest rates, or requests for a guarantor or bond.

Can You Still Get Finance with Bad Credit?

Yes, but it’s not easy. Some finance companies, including those working with car dealerships, offer bad credit loans or second chance finance. These often come with higher costs and stricter terms.

FAQs

1. How can I find out my credit score in NZ?
You can request a free credit report from Centrix, Equifax, or illion once per year.

2. Does checking my credit score lower it?
No, checking your own score is considered a soft inquiry and doesn’t affect it.

3. Can I improve a bad credit score?
Yes. With consistent on-time payments, reducing debts, and limiting credit applications, your score will improve over time.

4. Is a score of 450 considered bad?
Yes. It would be considered poor by most lenders and may limit your options.