Credit – know your score!
Most of us will all need to apply for credit at some time in our lives – it’s almost a certainty. By taking ownership and being pro-active in managing your credit, you can avoid any unpleasant surprises and make sure that financial support will be there when you need it most.
Anyone who has ever made use of credit has a credit history, and this information is stored and made available to potential creditors. This history reflects how well you have managed your credit in the past, including whether you honoured your commitments regularly, were a slow payer, were delinquent or had legal action or judgements taken against you.
A potential creditor will access your information from the credit register, and make a decision on granting credit, based on what is recorded. They may decide to provide you with credit at a higher interest rate, or refuse you credit at all. So it is in your best interest to keep a clear credit history and to know what your credit record looks like!
In South Africa, under the National Credit Act (NCA), each person is entitled to one free credit report per year, obtainable from one of the four credit bureaus in SA -TransUnion (ITC), Experian, XDS and Compuscan.
Fewer that 5% of South Africans actually use this facility – perhaps ignorant or scared of what they will find out. Many people also only check their credit reports when it is too late – for example after the credit they applied for has been turned down.
The internet provides a number of options to check your credit record, but I rather like the facility provided in www.clearscore.co.za, provided by Experian. It’s comprehensive and asks for a fair bit of information, but gives a good overall view of all ones debts including home loan and short term credit balances.
If you want a quick view on your credit worthiness, the Capitec banking app also provides this in one easy step and is linked to Compuscan.
In doing this credit check, you might not be entirely happy with the outcome and you have the right to challenge this information. Identity theft and human error (often on the part of credit providers) are two of the major causes of incorrect consumer credit information being held by credit bureaux.
If there is any information you are disputing on your credit profile or want information to be updated or removed, you need to take this up with the relevant credit bureau. Allow them 20 working days to resolve your complaint, and if you are not happy with the outcome of their investigation then you should contact the national credit ombudsman for assistance.
It’s your credit score and you should ensure that it is correct to avoid any unnecessary embarrassment or difficulties later on!
You should be proactive and implement behavior that will build and maintain a good credit score:
- Try to keep credit repayments below 30% of your monthly income. This is good for your cash flow as well as for your credit report.
- Pay the full installment amount that is owed on your account(s) every month and pay on time each month
- Work according to your budget and within your means when purchasing on credit
- Ask the credit provider (when applying for credit) to show you how much you will pay every month, to prevent over-indebtedness
- Talk to your credit provider if you are unable to make a payment due to unforeseen circumstances, to see if an alternative repayment agreement can be reached
- Never ignore a letter of demand for payment or a summons to court for non-payment
It’s your credit history and score. Take ownership of it – empower yourself by knowing what your history reflects and consciously work as maintaining a good score. It’s in your best interest in the long run.