Loans 'n things: 5 ways Kiwi businesses can transform their credit scores

Kiwi businesses - like Kiwis themselves - are a can-do kinda bunch..But when it comes to your credit score? It’s a little lacklustre to say the least. Just like your credit cards following a long trip or your bank balance in the aftermath of an...over-exuberant birthday, taking a look at your credit score can inspire reactions as varied as, well, the number itself. Shock. Horror. Surprise. The list goes on.Credit Scores have been at the forefront of American business concerns for decades, but it feels like only recently that New Zealand counterparts are finally sitting up and taking notice. With good reason. Lower loan totals? Higher interest rates? Difficulty during the application process? A poor credit score can rain on your financial parade. We think it’s about time Kiwis kicked those low credit scores to the curb, so here’s a look at just some of the ways your business can do just this.

1. Address any outstanding errors before applying for a loan

At the end of the day, we’re all human. And what do us humans all have in common? From time to time we make mistakes. Yes, even those frowny-faced financial providers! Just because an item is a part of your credit report, doesn’t necessarily mean that it should be there in the first place. Big or small, mistakes can - and are - made as your financial activity is recorded. That’s why it pays - literally - to check your credit report before you submit it for judgement by credit unions, banks, or peer-2-peer lenders through a lo an or credit application. Fixing any errors could boost your credit score, and save you a lot of stress and possibly thousands of dollars in interest. Doing so is easy-as. Apply for your credit report via services like Centrix or Equifax, give it a once over, and then contact the credit provider or credit reporting body and ask them to take a closer look if you find anything out of place. If they find that this information is incorrect, they’ll amend your report and your credit score.Note: It can take six-to-ten weeks for any necessary corrections to be carried out, so get in early.

2. Work double time to pay down your debts

Wait, what? High outstanding debts can negatively affect your credit score? Colour me surprised! Jokes aside, it’s easy to downplay just how much impact your loans, credit card debt, and other outstanding debts can have on that all-important number.All debt is detrimental, but high amounts of revolving debt in particular - such as credit cards - are an immediate red flag for financial providers flicking through your report. Doubly so if you have a history of late or skipped payments to your name.Knowing that lenders will always compare your current debts with your overall credit can be used to your advantage. Keeping them happy doesn’t have to be difficult, just aim to lower your debts down to around 15-20% of your overall credit. Additional forms of revenue, Debt Snowball strategies, and a little Kiwi ingenuity should help you along the way.

3. Unlike public transport, keep your payments running on time

When it comes to your bills, don’t do as Auckland public transport does and leave it late. You might shake your first at a late train, but rest assured your financial providers will be doing more than grumbling if they find they have a serial late payer on their hands. Keeping up with your repayments - or not, as the case may be - can account for as much as 35% of the calculation of your credit score. That said, running on time isn’t always realistic, or even possible. Life has a worrisome way of throwing unexpected expenses your way, at which point it’s tempting to shut up shop and skip a payment or two. Don’t do this!Instead, pick up the phone and get in touch with your service provider or credit company, and settle in for story time. Kiwis are renowned for giving things a fair go, and more often than not you’ll find your local credit union or financial institution will reciprocate in kind.At the end of the day, financial providers would rather work with you and work out a way to get their money back that doesn’t resort to incessant calls and collection agencies. Prove that you’re dedicated to doing the right thing, and you’ll keep your credit score in tact. Tip: Setting up automatic payments to cover your monthly expenses is a great way to ensure they’re paid on-time, every time.

4. Consider a consolidation loan

As the old saying goes, ‘the little things all add up’. Unfortunately, this adage doesn’t discriminate: it applies to the good as well as the bad.Whether you’re juggling credit cards or overdue expenses, those little debts begin to add up to big debts, and before you know it you’re managing multiple repayments each and every month, to a range of providers, and all at different rates. Oh my…Thankfully, it works just as easily in reverse as well. Through the consolidation process, you can save money on interest and reduce your weekly repayments. The small things add up to big things, and before you know it you’re paying back your debts at a much faster rate and improving your credit score alongside it.

5. Don’t apply for additional loans or accounts

You may have heard that opening additional lines of credit is a great way to improve your credit score, but this isn’t entirely true. Every time you open an additional account, this is recorded within your credit report. When a financial institution looks over your report, they’ll see that not only have you fallen behind on payments or carry a large debt, but that you also have multiple additional accounts to your name which is a major risk factor to anyone considering approving a low-interest loan or other application.Tip: If you have strong relationships with certain supplier, open up a credit account with them to increase the total number of positive payments in your credit report. While it isn’t always easy, working to improve your business's credit score through the reduction of debt and improving your repayment practices is an effective way to boost your reputation among New Zealand’s financial providers. When you next have a spare second, consider taking action and see just what a difference it can make to your future prospects.

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