Many South Africans are experiencing some form of financial stress owing to the current financial climate. You may miss a credit card or loan repayment and when you try and open an account at your favourite clothing store or apply for a home loan, you may find out that you have been blacklisted, notes consulting agency, Credit Clear.
In South Africa, being blacklisted is an obsolete term in law, but is still used by some to describe those who have a record of non-payment of outstanding debt. This is relevant to any form of credit that has been given: this could be money owned on a bank loan, credit card or store card or even your household bond.
Regular checks on your credit report can help you avoid a disappointing surprise, the agency said.
Your credit report gives you a clear indication of your payment behaviour and history. It tracks all your accounts and indicates where you have missed a payment or gone into arrears with your account over a period of time.
“It is important to clear your bad credit history as reference is often made to your credit report even when applying for a job and of course when applying for credit – and this can/will impede you if its not in order,” said Mark Bishop managing member at Credit Clear.
There are steps that can be taken to correct your credit rating and have your name ‘repaired’:
- Check if the debt has effectively expired.
- Negotiate with creditors to reduce monthly repayments.
- Negotiate affordable settlements of outstanding debt.
- Make sure you do not have to deal with creditors. And most importantly: clear your name.
“Being ‘blacklisted’/credit impaired is a major stumbling block for an individual in trying to gain financial freedom, and it needs to be solved to allow individuals to participate on an equal footing in our economy by giving them access to jobs and finance without being held back,” said Bishop.
Being ‘blacklisted’ is not something you should be ashamed of, many people and even professionals find themselves in this situation. It is therefore important that you regularly check your credit report, seek assistance and make arrangements for the outstanding debt to be paid back, he said.
Fewer than 5% of South African consumers make use of the legislation which entitles them to obtain their credit report free of charge from every credit bureau every year, notes credit bureau, TransUnion.
Many people only check their credit reports when it is too late – for example after the credit they applied for in order to buy a house or a car has been turned down.
Often, they cannot understand why this is so, particularly if they have ensured that they live within their means, don’t have too much debt and pay the full amount due on their accounts in full and on time every month.
Although the decision whether or not to grant credit does not lie with the credit bureau which compiles the credit report, this report is used by credit providers – banks, retail stores, cellphone companies and so on – when a consumer applies for credit or to open an account, TransUnion said.
The credit provider uses the information in the credit report to score the applicant’s creditworthiness and decide, based on their own criteria, whether or not to grant the credit applied for, or whether to grant a lesser amount – and at what interest rate.
Regular examination of one’s credit report will enable consumers to check that all the information in it is accurate. Sometimes there could be errors or areas of dispute.
These disputes may have been no more serious that an error in name or address; but some could well have involved a far more serious issue such as inaccurate reflection of payments made, TransUnion said.
A regular examination of one’s credit report could also provide timely warning to consumers that they might have been the victim of identity theft with the identity thieves running up enormous debt in their name.