Privacy flags on credit score cost
A credit bureau has stopped telling people their credit scores unless they pay it $52, prompting the privacy commissioner to diary a review of whether credit scores are transparent.
Consumers are being advised to get a copy of their credit files at least once a year because companies have started storing more information, including people's total credit limits and whether they pay bills, such as phone bills, loans and mortgages on time.
The credit reporting privacy code, which supplements the Privacy Act, gives people the right to a free copy of any credit information credit bureaux hold about them and the right to an explanation of their credit score if the bureau has generated one.
Only one credit bureau - Veda - currently generates credit scores on New Zealanders.
Veda previously included people's scores for free when they requested a copy of their file but it now will do so only if they pay $51.95 for an urgent copy of their credit file rather than the free option they're entitled to under the Privacy Act.
The move has prompted the privacy commissioner's office to add the transparency of credit scoring to its list of issues to look at when it reviews last year's changes to credit reporting rules.
The review won't happen for another two years, however the commissioner has the power to change the code sooner if major concerns arise.
Veda says because technically the score is generated when requested, it does not "hold" people's scores on file and is not required to release them for free.
Veda managing director John Roberts said the score was Veda's intellectual property and constituted a premium added-value service, which someone could use to show they were a good credit risk. The score was published the moment Veda was asked for it.
Free reports from Veda usually take about a week but can take up to a month in busy times.
"Given the timeframe on supplying a free report the score may well have changed from the time of request. An express report is supplied within 24 hours so the score is relevant," said Roberts.
Critics of Veda's scores have questioned whether they are valuable because the vast majority of New Zealanders have virtually blank credit files, the exception being people who have made a major loan default.
Rival bureau Centrix limits itself to colour coding people from red to green, labelling someone with multiple defaults red and an identity-verified person with a clean record green.
However, credit scores look set to become more widespread under a new system being adopted this year. It lets companies store and share much fuller information, which will allow bureaux to generate more meaningful scores.
A bad score could result in someone being declined credit or offered higher interest rates than someone with a good score.
Under Veda's approach, consumers will not necessarily be able to see their own scores free, despite knowing companies may be going to view them before approving loans, credit cards, power or phone contracts.
Centrix' managing director Keith McLaughlin said bureaus should be as open as possible with people's credit information because it belonged to consumers.
McLaughlin said Centrix would look at creating credit scores once fuller payments information began appearing and would provide them free.
Assistant Privacy Commissioner Blair Stewart said when the latest version of the code was drafted the key issue with credit scores was ensuring people were entitled to an explanation of what their score meant. At that point, people's scores were being released on request by the company making them.
Stewart said the 2015 review - due on the third anniversary of privacy rule changes - was a chance to check how well the code was protecting consumers and whether it needed strengthening.
CREDIT INFORMATION RIGHTS ARE INCONSPICUOUS / Business, page 8
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