Can I borrow money if I have bad credit?

Your credit history is a critical measure used by lenders to assess how likely you are to default on your repayment obligations.  Bad credit can stem from something as small as unpaid power bills from several years ago to defaulting on a loan or being declared bankrupt. 

All lending institutions run a credit check on any prospective borrower so it’s best to front foot any credit issues with the lender straight away.  Depending on who the default is to and how many there are, if you can provide a logical explanation eg your flat power bill was under your name and it was never changed when you left, a bank may deem you as low risk and be happy to lend to you. 

On the other hand, if you know your credit history is probably a bit too hairy for a bank, especially when it comes to defaults to lending institutions or bankruptcy, there are a plethora of non-bank lenders who can help you get back on track to achieving your financial goals. 

As non-bank lenders are not governed by the same stringent rules & regulations banks are, they can have a larger appetite for riskier borrowers and simply apply a higher interest rate to offset this risk.  Their base interest rates start higher than mainstream banks and the more risk you pose, the higher your rate, generally ranging between 7 – 11%.

With any non-bank lending, the goal is to work towards being able to move onto a lower rate loan product or refinance to a mainstream bank as soon as possible.  High interest rate loan products are generally only a stepping stone to helping you move forward from your past and a good mortgage adviser will work with you closely to put a plan in place to get you back on track.   

How do I find out my credit score?  There are several credit agencies in NZ who can provide your credit report for free: creditsimple.co.nz, centrix.co.nz and mycreditfile.co.nz.

If your credit score is less than 700, talk to Jiji Couch from Vega Lend who can discuss your options, steer you in the right direction and find a lender that best suits your situation and goals.