Check your credit record

A credit rating is a key factor in determining your credit worthiness.

The current South African credit rating system is one of the best worldwide. The National Credit Act protects consumers from entrenching themselves in the ever deepening pit of debt. Credit bureaus and credit providers are now regulated and a role for debt counsellors has been introduced. Credit providers are required to explain the implications of a credit agreement to consumers before the credit is granted.

“Make sure your credit rating reflects a good image,” says Deon Lessing (pictured), Betterbond marketing director, “a good credit rating is the only way credit providers will assess your financial reputation in the market place.”

There are two major credit bureaus in South Africa that keep records of consumer credit worthiness, namely TransUnion and Experian. These bureaus are competitors in the market and may have different information with regards to a consumer. It is important to check both bureaus in order to get a holistic view of your financial record. A nominal fee may be payable to obtain your credit record, but the benefit will far out weigh the cost.

Your credit score is based on your ability to manage credit responsibly. This means that you need have a credit line in order to be scored. Bear in mind however, opening unnecessary accounts is not a good idea, even if they have been paid. Unused credit facilities can have a negative impact on your ability to obtain further credit when needed. The National Credit Regulator will take into account the full limit of the credit agreements on record, whether they are being used or not. If credit facilities are not being utilised, rather close these accounts or lower the credit limit.

What is the benefit of a good credit rating, you ask? A good credit rating can be an asset when purchasing a property. The interest rate that credit providers are prepared to give a consumer will depend on their credit score – the better the score, the lower the interest rate. This is important because the final amount you pay for your purchase will largely depend on the rate at which you are financed.

Prevention is better than cure, and keeping a good credit rating is far easier than trying to repair a bad credit rating. If a problem occurs, it is advisable to sort out the issue with the relevant institution without delay. Immediate action can mitigate the situation before it gets out of control. It is important to not over extend yourself. Dave Smith, CEO of Interfusion Finance says: “A late or missed payment is reported to the credit bureaus and will severely tarnish your financial reputation. Payment-profile data is provided to credit bureaus by most creditors on a monthly basis. This information records the way a consumer has conducted their accounts over the last twenty-four months and is extensively used by credit providers to assess credit applications.”

Some consumers may have already fallen prey to the debt trap and need a way to clean the slate. “Consumers who have judgments on their record can contact an attorney who deals with litigation matters to have the judgment rescinded. However, this can only be done once the particular judgment creditor has been settled. Most retail stores and banks default listings will remain on a consumer’s credit profile for two years from the date the default was recorded. Consumers should contact the relevant credit provider to ascertain whether the default can be removed or updated once the account has been settled,” advises Smith

“Homeowners can use a company like Interfusion to assist them. Banks and debt counsellors are also available to consumers seeking financial advice,” says Lessing, “The National Credit Regulator has a sophisticated system in place that ensures consumers don’t create debt they can’t pay, however it is only effective if consumers are honest when applying for credit,” Lessing concludes.

Visit www.transunion.co.za or www.experian.co.za to check your credit score.