A bad credit rating can negatively affect your life in many ways. Essentially, your credit score represents your history of punctual repayments on credit accounts. For late payments, points are deducted from your score, while points are added to your score for timely and full repayments.
Credit bureaus are companies that keep track of your loan repayment history, as well as your debt. In other words, they keep track of how well you handle credit and supply this information to prospective lenders and credit providers in the form of a credit score. Based on this information, they calculate whether or not you are a risky borrower.
The threat of being blacklisted is often associated with credit ratings and scores. However, according to the Credit Ombud, ‘blacklisting’ is a misleading term that came about when credit bureaus only kept negative information.
Following international trends, credit grantors are now actively encouraged to also share positive information about their customers, as this facilitates access to credit. The perception that credit bureaus only keep negative data is therefore not true. For example, about 60% of the information held by credit bureaus are positive.
Know your credit status
It is important to bear in mind that The National Credit Act (NCA) makes provision for employers to check a candidate’s credit status. A bad credit score may therefore affect you negatively when you apply for a job, as companies and organisations regard truth, trustworthiness and ethical conduct, particularly with regard to the handling of financial matters, as being of the utmost importance. It is therefore critical for you to know your credit status so that you always have the full picture of your credit history and credit score.
Through the National Credit Act, you are entitled to one free credit report a year, which can be obtained from the following credit bureaus: TransUnion (ITC) (www.transunion.co.za ; contact number 0861 482 482), Experian (www.experian.co.za; 0861 10 56 65), XDS (www.credit4life.co.za; 0861 127 334) and Compuscan (www.compuscan.co.za; 0861 127 334). If you want another report within the same year, you need to pay an administration fee of approximately R20 per credit report.
If there is any information on your credit report that you disagree with or want to be updated or removed, you need to phone the relevant credit bureau from which you obtained your rating, complete an application form and send the bureau the required signed forms and your evidence as soon as possible. Your case will then be investigated. If you are not happy with the outcome of the bureau’s investigation, you can call the Credit Ombud (0861 66 28 37) who will assist you as far as possible, free of charge.
Improve your credit rating
As you may benefit substantially from a good credit rating – for example, lower interest rates or reduced deposits on future loans – it is important to work hard at boosting your credit score. The following tips on how to improve your credit rating are well worth remembering:
- Pay off any debt in good time, even strive to pay more than the amount required.
- Don’t miss a single payment.
- Use debt only for large and indispensable items.
- Analyse your credit report and cut out any unnecessary credit accounts.
- Most importantly, live within your means.
By Wilma de Bruin