Updated 27 May 2010

---

Introduction

Your credit file might not be as squeaky clean as you thought.

Mistakes in your credit file could see you denied a loan, charged too high a rate of interest, or fail to get a new job. It’s essential that you check the accuracy of what gets put into your credit history.

We explain which organisations can hold financial information about you, who else can access it, and your rights to view and change your files.

Case study

The last thing you need when you’re applying for a mortgage is to hear your name is on a list of bad debtors – for a debt you never had. But that’s what happened to Tim Hunt (not his real name) last August.

Tim had been a careful borrower for more than a decade. He and his wife had paid off mortgages on two houses and never got into strife with their credit cards. However, last year they applied for a mortgage from ASB. A few days later Tim received a letter from GE Money saying he was in default on a GE Money personal loan of nearly $7000 and this information had been given to credit-reporting agency Dun and Bradstreet.

An urgent phone call to GE Money, as well as a complaint to ASB, saw the issue resolved. But Tim doesn’t believe he was given a full explanation. He believes GE Money had lost track of a defaulting customer who shared his name. GE then got access to his contact details from the credit check ASB did after Tim and his wife applied for their mortgage.

Tim later received a letter of apology from another company, Veda Advantage. Veda Advantage had given GE Money Tim's address.

Tim eventually received approval for his mortgage. But he was left wondering what other incorrect information was held about him – and whether a similar problem could happen again. He took our advice and requested a copy of the information held about him from both Veda Advantage, and Dun and Bradstreet.

What was in Tim’s file?

Tim requested his credit files from Veda Advantage, and Dun and Bradstreet using the 24-hour-turnaround service (see Accessing your file). He used couriers rather than faxing each application, which slowed the process. He received the files five days later.

Dun and Bradstreet's letter stated they did not have a credit file on Tim (so no record of unpaid loans there). Veda Advantage said its file had been created more than 15 years ago and included no defaults or other adverse information. Tim's "VedaScore" was nearly 900 out of a possible 1000 (the higher the number the better). Since neither file had any record of the GE Money mix-up, Tim was reasonably reassured. However, he will be checking regularly.

The data-recording process clearly isn’t foolproof. Veda Advantage told Tim the data it collected was recorded through “sophisticated matching regimes”. However the company went on to say that in his case a mistake was made when a “particular bulk run” was entered manually.

Your credit file

Each business with which you have an account has records about you including banks, insurers, power and telephone companies, and retailers.

But they’re not the only ones. Two credit-reporting companies in New Zealand – Veda Advantage (formerly Baycorp Advantage), and Dun and Bradstreet – collect and on-sell information about you.

These companies focus on your credit history. They get information from credit issuers (such as banks and finance companies), court records, and publicly accessible databases.

These credit-reporting companies can’t sell this information to just anyone, because access to the information is governed by the Privacy Act and by regulations overseen by the Privacy Commissioner. But they can sell it to companies which meet the definition of "credit provider" or which have your permission to look at your credit record. This includes lenders, retailers which offer you credit and prospective insurers, landlords and employers.

What's filed about you

The file that a credit-reporting company has compiled about you is known as your “credit file”. It may include the records that show (amongst other things):

• your name and any other names you use, date of birth, gender, marital status, present and past addresseses, employer and occupation
• who has made credit enquiries about you and when
• applications you’ve made for credit cards, hire purchases and other loans
• details of your loan applications (but not whether your application was successful or not)
• bills you've defaulted on, even if you eventually paid up after the default was listed with the credit reporting company
• records of any ID you’ve reported lost or stolen
• insolvency information including proceedings relating to bankruptcy, No Asset Procedures and Summary Instalment Orders.  

Your Veda Advantage file will also include your “VedaScore”. This is a summary of your risk profile which is based on your financial behaviour (recorded in your credit report) compared to the average of other borrowers.

At present, credit files are based on negative information rather than positive. So if you've been meticulous in paying bills and keeping your finances in order, it won't be obvious from your file – that’s because this type of “positive” information is not allowed to be collected (see “Positive report, below”). At best there might be a note saying "No adverse information could be found on the subject”.

Other big databases

Other companies which provide hire-purchase facilities or run store cards also have large credit information databases. Fisher & Paykel Finance provides credit facilities for retailers. Farmers department store holds information on customers with Farmers cards or hire purchase accounts as well as customers from other shops that Farmers provides credit facilities for, including Michael Hill Jeweller. Some other companies have similar databases.

F&P and Farmers don't sell credit information to third parties in the way Veda Advantage and Dun & Bradstreet do, and so are not credit reporters.

Positive report

Credit reporting is controlled by the Credit Reporting Privacy Code, which was issued by the Privacy Commissioner in 2004.

This code has been reviewed by the Privacy Commissioner Marie Shroff. As part of her review, she commissioned a reference group of stakeholders – including Consumer NZ – to discuss the operation of the code and how it could be developed. Positive credit reporting – where "positive" events such as repaying debts are included on the credit file – was discussed at length by the reference group.

We believe positive reporting could improve access to credit and lower credit costs for prudent consumers, making it an option worth looking at. The results of the review and whether New Zealand moves towards a form of positive credit reporting will be known this year.

Accessing your file

Who can access your file

Your file isn't open to everyone. Companies need your permission to see it. But you've probably signed that right over countless times without being aware of it. In a surprisingly large number of application forms for finance, rental accommodation and other goods and services, this permission is in the fine print.

Some government agencies have the legal right to comb through your file without your permission, under circumstances provided for in the privacy law.

Viewing and changing your file

You're entitled under the Privacy Act to see what information companies hold on you, and to correct it.

Given the possibility of human error, it’s smart to check the accuracy of the information held in your credit file. You should do it every five years – or more often if you’re an active borrower.

Both Veda Advantage, and Dun and Bradstreet will supply you with a copy of your credit file free if you’re prepared to wait 10 working days – or for $23 (Veda Advantage) and $25 (Dun and Bradstreet) for a “fast track” 24-hour-turnaround service.

To access your file, you need to send a copy of your photo ID (for proof of your signature) and, if you're paying for the fast track service, your credit-card details (or a cheque). All of this is important info that you should keep secure – so we recommend you send it by courier, with the recipient’s signature requested, to prevent it getting into the wrong hands.

What to do if you credit file has errors

If your credit file has an error, seek a correction straightaway and in writing.

Set out your reasons clearly. Provide evidence where possible – otherwise your objections may be treated as delaying tactics. If the debt collectors call, tell them the debt is in dispute. Most debt collectors keep records of their phone calls, so take careful note of the date and time of calls and to whom you have spoken. You'll need your own records if there is an argument later over who said what.

If you can't resolve matters, complain to the Privacy Commissioner or take your dispute to a disputes tribunal or other court. 

Contact details

Veda Advantage
www.vedaadvantage.co.nz or www.mycreditfile.co.nz phone 0800 692 733.

Dun & Bradstreet NZ Ltd
www.dnb.co.nz phone 0800 733 707.

Farmers
Call 0800 101 170, or email help@farmersfinancecard.co.nz and request either certain aspects of your file, or the whole thing.

Insurance claims register

A survey from the 1990s suggested New Zealand insurers faced over $65 million per year in insurance fraud, but the Insurance Council says anecdotal evidence suggests the real figure is higher.

One weapon against fraud is a rapidly growing register of insurance claims run by a subsidiary of the council. Insurance companies can use it to find out about past claims you've made.

When you make a claim under a house, contents, car or travel policy with a large insurer, the company passes the details to the Insurance Claims Register.

How the information is used

Information is used in two ways. When you apply for insurance, the company can check that what you've said about previous claims is correct. When you lodge a claim, the company can compare it against your previous claims on the database.

Insurance companies are aiming to cut down on fraud and weed out people who are dishonest about past claims when applying for new insurance.

Checks can be done by computers, which match names, or manually. The manual approach lets the company search by driver's licence number, date of birth, phone number or policy number. Fraudsters using a different name or address could come unstuck.

Preventing fraud

The register is working. An impatient chap who reported his car stolen with one company, lodged an accident claim involving the same car two weeks later under another policy. He was caught out. Another person made a travel insurance claim for goods lost overseas. After a second trip, he made an identical claim with another company. The ripoff was spotted.

The register holds the majority of house, contents and car insurance claims from the last four years, together with some travel claims. Its usefulness is likely to increase over time as the information builds.

Companies which are part of the register are: AA, AMP, FMG, Lumley, NZI, State, SIS, Tower and Vero. Many insurance policies administered by banks are underwritten by one of these companies.

Viewing your file

Contact your insurer or the Insurance Council in Wellington for a request form. You can email them at icnz@icnz.org.nz.

There is currently no charge. You won't have a file if you haven't made a claim in recent years.