What makes a good credit history

[shami]

A mortgage broker said, he took my application to the bank whom I bank with, for a 5% deposit mortgage preapproval, and was told my account conduct was not good.

I never had a credit card, loan in NZ.
I never missed on any payments or made late payments for rent or any bills. So thought my credit rating will be excellent.

I keep small amount in cheque account and rest I keep in the linked savings account. Sometimes my cheque account will be overdrawn by small amounts often less than 50$, and very rarely upto $100. In almost all the instance I had credited back the cheque account on the same day so the bank don't fine me, or rarely the next day.

Before going through the mortgage broker I talked to the bank, and they said they can give a preapproval if I can make 10% deposit.

1. What makes a good credit history ?
2. Does the banks have different criteria when going directly or through brokers ?

[eri]

I never had a credit card, loan in NZ.

if you've never borrowed money in nz

you have no credit history

[shami]

So what does the lender look when I go for my first loan ?

[eri]

afaik

they look for your ability to pay

and your track record of paying

they want to make money off you

they want to see that others have successfully made money off you

it gives them confidence

[Keys]

I never had a credit card, loan in NZ.

if you've never borrowed money in nz

you have no credit history

Not necessarily. How many times have you moved in the last few years. Credit checks which I have seen don't show money borrowings. They show credit checking. For someone who has had zero loans/HP's etc. there are no credit checking entries. This, on itself, is not too bad. Moving home often is a worse factor.

[Perry]

From past experience - second hand - and talking
to others like Orion, having no credit history seems
almost the same as having a bad credit rating.

Bizarre as it seems, that was the impression I got
from someone who told me a tale not too dis-similar
to Shami's experience. As a consequence, I advised
some family members who were similar - always paid
at the time of purchase - to actually get something
on one of those no-interest HP arrangements, for no
other reason than creating a good credit history.

Almost seems as if the 'system' discriminates against
people who pay as they go!

[Cody]

every bank is different . the banks have lost a lot of money and they are now cautious . I suppose the answer is : the more deposit you have the better. The banks are looking into your ability to save - so if your saving acc is linked to your current account, and every week there is money going into it - great start- do so for the next six months and approach them again....

[eri]

I advised
some family members who were similar - always paid
at the time of purchase - to actually get something
on one of those no-interest HP arrangements, for no
other reason than creating a good credit history.

Almost seems as if the 'system' discriminates against
people who pay as they go!

years ago i bought a tv on 12months interest free credit for this purpose

even though i could have paid cash

probably as it was so long ago it had dropped off the radar

but the point is they want to create a revenue stream out of you

they want your money

if you are the kind of person who uses a credit card and always pays it off within the interest free period

it shows 2 things about you

1. you are quite good with your money

2. the bank doesn't make any money off you, you make money off them

they would far prefer you paid just the monthly minimum so they could make some money off you

lending money is not a social enterprise run by welfare groups

even micro-credit banks in bangladesh want/need to make money off the people they lend too

so the lender looks for 2 things from the borrower

1. the ability to make more money off them than the cost of the exercise

2. to lower the risk as much as possible that you won't/can't pay the loan back

[Maccachic]

My visa pays me at the end of the year, im guessing my bank doesn't like that Altho they were pretty quick to drop my float rate when I asked.

[Perry]

My visa pays me at the end of the year,

What exactly does that mean? The card type that refunds
the fees if a certain amount is spent? Something else?

I find that the top credit cards (with expensive regular
fees) are really only viable if one uses it for overseas
travel at least once every two years, taking advantage
of the in-built (albeit limited) travel insurance.

I.e. the airpoints or other 'rewards' are roughly equivalent
to the difference between the 'common' card fees and
those of the 'gold-plated' cards of the same brand.

[Cody]

yes good question, are we banking with the wrong banks????Maccachic, tell us the secrets !!

[Maccachic]

Thoroughbred visa from National bank I put everything thru it I can, have it set up to pay it off fully at the end of the month and at the end of the year I get 1% cash back (think you get .5% untill you spend over $3000).

Its $50 per year.

[Keys]

BNZ offers interest on credit on your credit card.

[Perry]

Thoroughbred visa from National bank I put everything thru it I can, have it set
up to pay it off fully at the end of the month and at the end of the year I get
1% cash back (think you get .5% until you spend over $3000). Its $50 per year.

What are the fees? I.e. is that $50
net, or you have fees to pay out of
that amount?

[NovInvestor]

I suggest you get a credit card and use it often, but use it similar to a cheque account where you always clear the balance within a month, but preferably every week.

this way, the bank can see how well you manage your finances.

If you can manage your credit card debt and never have a cent charged for interest, then this demonstrates you have financial literacy and will help convince the bank that you can manage your mortgage as well.