How to remove or correct a default on your credit file in NZ

What you can and cannot get removed

Be clear about this first, because plenty of websites are not. Under the Credit Reporting Privacy Code, a credit reporter has to take reasonable steps to keep your information accurate. That gives you a right to a correction. It does not give you a right to have true information deleted because it is inconvenient.

You have a strong case when:

• The debt is not yours. A mix-up with someone who has a similar name, a shared address or a joint account you were never part of.
• The details are wrong. The amount, the creditor, the date listed.
• It was paid but shows as unpaid. If you can prove the payment, the entry should be updated.
• It is below the minimum. The Code lists a default only when the overdue amount is $125 or more.
• It has passed its retention period and is still there. Defaults should drop off after five years.
• It is a duplicate. The same debt listed twice.
• It came from identity theft or fraud.

You do not have a case when the debt is yours, the amount is right and the listing is recent enough. In that situation the honest answer is that a correct default cannot be removed early, whether you pay it or not. See how long defaults stay on file for the periods.

Step by step: how to dispute a default

1. Get all three reports

Centrix, Equifax and Experian each hold their own file, and an error on one may or may not be on the others. Consumer Protection tells people to check all three. Each gives you a free report, and the reporter should deal with your request within 20 days. If it takes longer, it must tell you why. (Experian is listed on official consumer pages where illion used to be.)

2. Gather your evidence

Evidence beats argument. Useful items:

• bank statements showing the payment
• a settlement or “paid in full” letter from the creditor
• the original contract or account statements, if the amount is the issue
• a police or identity-theft report if fraud is involved
• dated letters or emails between you and the creditor

3. Contact the creditor that supplied the default

Consumer Protection’s advice is to explain the problem to the organisation that supplied the information and give evidence. It must investigate and correct any errors. Many fixes happen at this step, because the creditor is the source and the reporter will usually check with it anyway.

4. Ask each reporter to correct the entry

Write to each bureau that shows the error. Say clearly what is wrong, what you want changed and attach the evidence. Use the word “correction”. While it checks, the item should be marked as disputed. Keep copies and note dates.

5. Read the answer

The reporter must decide as soon as reasonably practicable. Equifax’s published summary says that if it takes more than 20 working days, the reporter must tell you about the delay and why. If it makes a correction, an amended report goes to subscribers who looked at your file in the previous 30 days. If it refuses, it must say why, and you can ask for a statement of the correction you sought to be added to your file, so any lender who reads the file sees your side.

6. Escalate if you need to

If the reporter will not fix it and you still think you are right:

1. The reporter’s complaints process. Every credit reporter must have one. Equifax, for example, acknowledges a complaint in writing within five working days and then advises within a further ten working days whether it is justified or how much more time it needs.
2. The Privacy Commissioner. You can complain to the Privacy Commissioner (0800 803 909). The Commissioner’s page on the Code warns that complaints needing an investigator may take a long time to assign, so do this step with a complete file of evidence.
3. The Human Rights Review Tribunal. Some unresolved cases can go on to the Tribunal.

If the default came from a lender: the dispute schemes

A separate route exists for complaints about the lender or credit provider itself, rather than the credit reporter. Lenders must belong to a dispute resolution scheme. Community Law lists four: Financial Services Complaints, the Insurance & Financial Services Ombudsman, the Banking Ombudsman and the Financial Dispute Resolution Service. Ask the lender which one it is registered with, or look it up, and contact that scheme.

This matters if, say, a lender charged fees you think were unlawful, or listed a default while you were disputing the debt in good faith. The scheme can look at how the lender behaved. It is a different question from whether the credit reporter’s file is accurate, and you can pursue both.

A worked example (illustrative only)

Picture someone who finds a $340 default from a power company on their Equifax file, for a bill they paid in full eight months before it was listed.

They send the power company a copy of the bank statement with the payment highlighted and ask it to withdraw the listing. They also send Equifax a correction request with the same statement. Equifax marks the item as disputed and checks with the creditor. Three weeks later the creditor confirms the payment and the entry is removed. Equifax sends an amended report to anyone who looked at the file in the last 30 days.

Had the creditor insisted the debt was unpaid, they could have asked for a statement of correction on the file and gone on to the complaints process and the Privacy Commissioner. This is a made-up case, and your timing will differ.

Credit repair schemes: why to be careful

Search for “remove default” and you will find companies offering to clean up your file for a fee. Think carefully before paying one.

• They have no special power. The right to dispute is yours and it is free. A company writes the same request you could.
• They cannot make accurate information disappear. Canstar’s guidance is blunt: you cannot change or remove correct information on your credit report, even if it is negative.
• Fees can be large for a letter. Some charge hundreds of dollars for what is a single email.
• A promise of certain removal is a red flag. Nobody controls the outcome of a lawful dispute.
• Customers can be pitched other products. Canstar notes people can be targeted with inappropriate debt solutions.

If you are overwhelmed, free help exists. MoneyTalks (0800 345 123) offers free budgeting support and can speak to creditors for you, and Community Law centres give free legal information. These are better first calls than a paid service.

What to do when the default is correct

If the debt is real, your options are still decent.

1. Pay it or agree a plan. Ask the creditor or collector in writing. A paid default, or one on a plan you keep to, reads better than an open one.
2. Get proof and ask for an update. Once it is paid, ask for written confirmation and make sure the reporter shows it as paid.
3. Note the drop-off date. Five years from listing. Plan your application around it where you can.
4. Build a fresh record. Rent, power, phone and any current loan paid on time. See our page on improving your credit before a car loan.
5. Add a short explanation. If the default came from redundancy, illness or a relationship breakdown, say so in a sentence when you apply.

Lenders look at more than the file. Car finance with defaults covers what they weigh.

Checklist before you send a dispute

• All three reports ordered and read.
• Each wrong entry listed with the reason it is wrong.
• Evidence attached, copies kept.
• Written request sent to the creditor and to each reporter that shows the error.
• Dates noted: when you sent it, the 20-working-day mark, and any reply.
• No new credit applications while the dispute is open, if you can help it.

Quick answers on names, scores and timing

Changing your name. A new name does not give you a clean file. Consumer Protection says identification information is kept indefinitely, so when you ask each bureau for your report, check that earlier names and addresses are matched to the right file, and ask them to correct anything that is not yours.

What a good score is. Consumer Protection describes a score above 700 out of 1,000 as good, though lenders use their own criteria.

Going from 500 to 700. No source gives a reliable timeframe, and anyone who names one is guessing. Defaults can stay for five years even after you pay in full, so removing a wrong entry can lift a score quickly, while a correct default has to age off. The route that works for a correct file is on-time payments and fewer applications, month after month.

How Fair Finance helps

Fair Finance is a referral service, not a lender. We do not fix credit files, and we will not charge you to try. You answer a few questions once and we run one soft credit check that does not affect your score. We then refer you to lenders on our panel who work with people who have defaults. Nobody can promise approval, and lenders decide case by case. If the right move is to correct an entry first, we will say so. Start with the eligibility check or see how it works.

General information only, not financial advice.

Sources

• Consumer Protection: Credit checks, scores and history
• Equifax: Your rights explained (corrections and complaints)
• Privacy Commissioner: Credit Reporting Privacy Code 2020
• Privacy Commissioner: Credit Reporting Privacy Code 2004 Amendment No 14 (the $125 default threshold)
• Community Law Manual: Credit reports (complaint routes and dispute schemes)
• Canstar: How to fix a bad credit score
• MoneyTalks
• Consumer Protection: Credit checks, scores and history