Is 420 the magic credit score number for a home loan application?
If you have bad credit, you might be wondering whether a bank will ever be willing to give you a home loan.
A person's credit score reflected how well they had paid off credit in the past and how likely they were to be able to service their debts in the future.
It takes into account factors like how long you have had credit accounts - that could also include things like power and internet bills - how often you make your payments on time, how much you owe on loans and credit cards, what types of credit you have, how often you ask for credit and any defaults or insolvencies in your history.
There are three different credit bureaux in New Zealand but, for all of them, the lower your score, the poorer your credit rating.
Centrix ranged from zero to 1000.
It said anything below 496 was poor and about 10 percent of the population was in that range. Centrix noted people in this bracket were more likely to be rejected for a loan.
Missed power or phone bills could sometimes impact a person's credit score. (File photo)
Photo:
Shutterstock / Allie Schmitz
People with slightly better scores might get a loan but have extra conditions.
For example, anything below 299 is low and 300 to 499 represented "room for improvement".
David Cunningham, chief executive at mortgage advice firm Squirrel, said about 420 was the level at which banks would draw a line.
"Some people's scores are way lower than expected. The biggest thing we see is missed minimum payments on credit cards over several months.
"One-off has a negligible impact. It's when it becomes a deteriorating trend."
He said people also needed to watch out for power bills and phone bills.
Sometimes a missed payment could affect someone's credit without them realising, for example if they had moved house and not paid a final bill.
But he said banks were generally open to an explanation if people could provide information about how they got into trouble.
Another mortgage adviser, Jeremy Andrews at Key Mortgages, said it was a "blurry line" that borrowers did not want to push too far.
"A score of 400 to 500 trending upward with good recent conduct might be better than a score of 500-plus with recent bounced payments or dishonours, unarranged overdraft fees. Any recent collection steps or agencies having to step in will be much harder to mitigate."
He said other things could be easier to fix or explain.
"Historical events affecting credit scores such as not paying bills on time, or just tipping into arrears, could be a short term problem and easily fixed. But if a borrower has not been paying either financial companies or property related bills such as property rates, on time every time, that can be a much bigger problem to resolve."
Head of Link Advisory Glen McLeod said banks had internal thresholds.
"That said, it's not just about the score itself. Lenders look at the full picture: what kind of credit issues are showing up, how recent they are, and what caused them.
"Life events-like a separation, illness, or unexpected financial hardship-can reflect on your credit score, even if they were temporary. That context matters and can influence how a lender views your application.
"If the credit history is too risky for a mainstream bank, non-bank lenders may still be an option. They tend to be more flexible, though that usually comes with higher interest rates to reflect the added risk."
Sign up for Ngā Pitopito Kōrero
,
a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
RNZ News
an hour ago
- RNZ News
Gender pay reversal identified by directors' fee survey
The survey also showed just 36 percent of private sector board directors were female. Photo: 123RF A survey on directors' fees has thrown up a surprise, showing female directors are earning more than their male counterparts in private sector boardrooms. The survey , by Strategic Pay, said female non-executive directors receive 17.2 percent more in fees on average. Managing director Cathy Hendry believes more women achieving higher positions in large listed companies is driving the change, but thinks there is more work to be done on gender balance on boards. "We have seen female directors increasing in terms of representation across the whole sample year-on-year, which is great to see. "The public sector is leading the way. You've almost got 50-50 percent representation male/females in the public sector [boards]. Its significantly lower in the private sector." The survey showed just 36 percent of private sector board directors were female, and just 21 percent were non-executive chairs. The survey highlighted a stark difference in the pay of directors on listed company boards compared to unlisted and private company boards. On average, directors on listed company boards earned 59 percent than their unlisted counterparts. Directors' fees were also increasing above the rate of inflation. Listed company directors' fees increased by just over 10 percent last year, while unlisted company directors say their fees increase by 8 percent on average. Hendry noted however that directors' fees had been static since Covid-19, and the rises were more of a catch-up. The pay gap between directors on private company boards and those on public sector boards was also pronounced, with those on listed company boards earning on average twice as much. Sign up for Ngā Pitopito Kōrero, a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
RNZ News
3 hours ago
- RNZ News
School support staff reject Ministry of Education pay offer
Teacher aides and support staff have rejected the latest offer. (File photo) Photo: Unpslash/ Laura Rivera Teacher aides and other school support staff belonging to the Educational Institute have rejected a deal that offers them less than half the pay rise they are seeking. The institute, Te Riu Roa (NZEI), said the offer was the third made by the Ministry of Education It said the offer included a pay rise of 60 cents an hour in the first year followed by 15 cents in the second year and 25 cents in the third year. The union said that amounted to a pay rise of four percent over three years for the lowest-paid support staff and about 1.7 percent for the highest-paid. The NZEI said its members were seeking an increase of five percent in the first year followed by 2.5 percent and 2.5 percent, or a total of 10 percent over three years. The ministry's offer also included lump-sum payments of $300 for full-time staff and $250 for part-time staff in the second and third years of the agreement. NZEI support staff rep and teacher aide Ally Kingi said members were angry and fired-up at meetings but were yet to decide what their next step would be. She said there were 28,000 support staff in schools, not all of whom were union members, and most were women earning less than $30,000 a year. Kingi said support staff won a pay equity boost in 2020 with provision for ongoing reviews to ensure they did not lose ground against male-dominated workforces, but had now lost the ability to have those reviews. She said members were angry about that. "I think it's a feeling of a workforce that's felt under-valued and then through winning our pay equity claims we had that real feeling of our work being seen and valued and felt really great. And then sort of to have sunk back down again, people aren't prepared to do that," she said. "It's hitting all of us in the backpocket... most people work just school hours or part of that time because we know schools aren't funded properly to employ us or to support the children that need supporting." Sign up for Ngā Pitopito Kōrero , a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
RNZ News
3 hours ago
- RNZ News
Housing makes 'a lot of sense' close to new Auckland train stations
Housing Minister Chris Bishop Photo: RNZ / Samuel Rillstone Requirements for housing densification around City Rail Link stations are about future-proofing Auckland for the next 20 to 30 years, the Minister for Housing and for Resource Management Act Reform says. The government will require Auckland Council to allow apartments of at least 15 storeys around the Mount Eden, Kingsland, and Morningside Stations, and 10 storeys around the Mount Albert and Baldwin Avenue stations. Originally, the plan was for six-storey buildings, however, Chris Bishop says the new directive from the government is supported by Auckland mayor Wayne Brown and most councillors. The changes will be part of a Resource Management Act amendment bill. Bishop told Morning Report it would take some time to build the developments, but it made sense to ensure residential and commercial development was possible around those key train stations. "We're building a $5 billion rapid transit rail link in Auckland. We should have some development, mixed use apartments and commercial, by the train stations. "I think that makes a lot of sense." North Shore councillor Richard Hills said the government's directive to allow 15-storey apartments near train stations won't transform the city overnight. He told Morning Report that council was moving in that direction anyway. High rise developments took a long time and would develop slowly over many years. Hills believed the directive would lead to more housing and more people near transport infrastructure. The blocks would be built within 800 metres to 1200 metres or a 10-minute walk from each station, he said. Meanwhile, leaky hospitals, rotting schools, mould in police stations and courthouses, and outages on ferries and commuter rail - those are some of the problems laid bare by the Infrastructure Commission in its first report into the state of the country's assets. It's found New Zealand is spending lots of money on infrastructure but getting little back out of it. Bishop said the report made for a "sobering" read. "We don't get a lot of bang for buck. In fact, the commission says we're in the bottom 10 percent in the OECD for value for money." It was a problem stretching back up to 30 years. The need for long-term asset registers and maintenance plans and looking after the infrastructure the country had rather than building new things had been identified years ago, he said. He was determined to change the system, particularly at central government level. Health was a classic example. Uniting the district health boards was a good move by the Labour government because it would help identify what they owned and the condition those buildings were in. "Half of government agencies don't have an asset register - it's pretty depressing." It would soon be a legal requirement. He was keen for a bipartisan approach not only to a projects pipeline but also for legislation changes in the resource management area. He said there were 1400 different zones around the country and these would be reduced drastically. "Getting the system right is a fundamental paramount importance and that's what this government is up for." Sign up for Ngā Pitopito Kōrero , a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
