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Credit report
Jul. 28th, 2011 10:52 amA couple of weeks ago I used a new online service to apply for for a free copy of my credit report, following an article in the Herald.
There's a 10 business day turnaround for the free service which is fine, I was in no hurry. Yesterday it arrived.
As expected my credit report is pretty much empty. There's one enquiry from 2008, when I bought my bed on credit ("interest free" deal beating putting it on the mortgage). Things drop off after 5 years, I've had the mortgage longer than that.
People reckon having a credit history is better than not. I disagree fairly strongly with that, as far as NZ credit reports only show the negatives.
While debt is important to finance some undertakings (setting up a business, buying a home in the current environment, and yes I went into debt to buy a good car) I fundamentally believe in saving first
- if your financial situation changes and you can't afford to save any more, you still have savings
- if your financial situation changes and you can't afford to keep up payment on your debt, it only gets worse. Sometimes in some very nasty ways.
- ideally debt should only be taken on if there is a medium-to-long term benefit which equals or outweighs the cost of the debt. Benefits include health (in the case of unexpected medical bills) or a home (in the case of a mortgage), so they are a little subjective. I would even stretch to a line of contact from the world outside, as seen here in Chch recently (not everyone gets most of their news from the internet).
I may be a little hypocritical here. I am not focusing everything on paying off the mortgage completely - instead I pay it down to a predetermined level (saving) then draw on it for the next step of home improvements, rinse repeat. I feel this brings me direct material benefit (more comfortable living, more resilient property value) and immaterial benefit (less frustration at having to delay home improvement plans) which outweigh my discomfort at being in debt to the current level and the interest incurred.
It is a balance I often ponder, aware that the exact same personal utility argument can be used to self-justify objectively destructive levels of credit ...
There's a 10 business day turnaround for the free service which is fine, I was in no hurry. Yesterday it arrived.
As expected my credit report is pretty much empty. There's one enquiry from 2008, when I bought my bed on credit ("interest free" deal beating putting it on the mortgage). Things drop off after 5 years, I've had the mortgage longer than that.
People reckon having a credit history is better than not. I disagree fairly strongly with that, as far as NZ credit reports only show the negatives.
While debt is important to finance some undertakings (setting up a business, buying a home in the current environment, and yes I went into debt to buy a good car) I fundamentally believe in saving first
- if your financial situation changes and you can't afford to save any more, you still have savings
- if your financial situation changes and you can't afford to keep up payment on your debt, it only gets worse. Sometimes in some very nasty ways.
- ideally debt should only be taken on if there is a medium-to-long term benefit which equals or outweighs the cost of the debt. Benefits include health (in the case of unexpected medical bills) or a home (in the case of a mortgage), so they are a little subjective. I would even stretch to a line of contact from the world outside, as seen here in Chch recently (not everyone gets most of their news from the internet).
I may be a little hypocritical here. I am not focusing everything on paying off the mortgage completely - instead I pay it down to a predetermined level (saving) then draw on it for the next step of home improvements, rinse repeat. I feel this brings me direct material benefit (more comfortable living, more resilient property value) and immaterial benefit (less frustration at having to delay home improvement plans) which outweigh my discomfort at being in debt to the current level and the interest incurred.
It is a balance I often ponder, aware that the exact same personal utility argument can be used to self-justify objectively destructive levels of credit ...
