If you have ever tried applying for a loan, a store account or any form of credit, you will be familiar with that nervous feeling that washes over you when a credit provider tells you that they will need to perform a credit check on you.
It really doesn't matter if you have never missed a payment in your entire life – nobody is immune to this feeling. However, if you are confident of your credit status, you will certainly feel less affected by this credit check and rightfully so.
Indicator of your debt repayment behaviour
Credit providers need to perform a credit check on you in order to determine what your credit worthiness is and how your history with credit looks. In the case of loans and credit, your past behaviour is the best indicator of your future behaviour.
Your credit score is based on your credit history.
If you have had stable credit for a long time and you always make your payments on time, you will almost certainly have a good credit score. However, the exact determinants of a person’s credit score are not exactly public knowledge.
Luckily, thanks to some financial experts in New Zealand, we have been able to get an insight in credit checks and how they determine credit scores.