How NZ’s credit scores stack up

New Zealand’s best credit scores can be found at the top of the South Island, credit ratings agency Centrix says.

It has released new data showing how New Zealand’s mean credit scores by region have changed from pre-Covid, through lockdown, to March this year.

Before the pandemic, the best score among new applicants for credit was held by people in the Tasman region, with an average 684. The worst was on the east coast of the North Island, where the average was 603.

A credit score is a number between zero and 1000 that indicates how likely a person is to make required payments.

Scores fell across the country during lockdown but have since rebounded. In March, Tasman had a mean score of 685 and Marlborough 690. Wellington also had a high average, at 690.

The east coast remained the lowest at 609, but that was a recovery from the 546 of lockdown. The average score nationwide was 649 in March, up from 584 last April.

Centrix managing director Keith McLaughlin said past payment history was a strong driver in the score and socioeconomic factors such as unemployment and homeownership had an influence.

‘‘As an example, regions like Wellington tend to have strong credit scores because of a high concentration of well-paid public servants and job stability, who tend to be in a better position to meet their account obligations in comparison to the East Coast who tend to have higher rates of poverty and unemployment, which tend to be associated with high rates of payment default.’’

He said every region had recovered from lockdown but Marlborough had the biggest increase, up 35 points.

‘‘Other regions that saw significant annual growth in average credit scores includes Auckland, up 20 points, Taranaki, up 17 points and the Bay of Plenty, up 16 points.’’

He said there were some signs of debt stress emerging. There were 10,800 accounts flagged as in hardship in March, up 2 per cent from February.

Of those, 35 per cent were mortgages, 32 per cent credit cards, 24 per cent loans and 8 per cent overdrafts.

‘‘Furthermore, there were 3700 active payment deferrals recorded when the scheme ended on March 31.’’

He said he expected the recently announced new rules for the housing market were likely to dampen demand for lending from property investors.

‘‘The ending of the Reserve Bank’s mortgage deferral scheme is also likely to see an increase in mortgage arrears, which are running at a remarkably low 1.2 per cent. At its peak, 7 per cent (80,000) of all mortgages were on deferral, but this had fallen to 3700 in late March.’’

More than three-quarters of mortgages on deferral restarted paying principal and interest, while another 10 per cent restarted interest-only payments.

Seven per cent of mortgages on deferral closed their account, a likely indication that they either sold their property or restructured their loan.

‘‘While the deferral scheme provided much needed relief to struggling homeowners, its ending will place some of those households under pressure once again. We will be watching closely to see whether we start to see increasing debt stress and a higher frequency of missed payments in the coming weeks as credit demand is a leading indicator of economic confidence.’’