Rek jou Cheque: The purpose of credit reports

Many people may not know everything there is to know about a credit report, but they do know that a “good” credit report can help them tremendously when they apply for credit, especially for a vehicle or a house.

Here are some of the burning questions Daily Voice readers have:

What exactly is a credit report?

A credit report is a collection of financial information about a person that is supplied by credit providers to credit bureaus approximately every 30 days.

A credit report will show your defaults (accounts that are more than 3 months in arrears), judgements, applications for credit and your credit score.

Why is a credit report important?

Credit providers will use your credit report, along with other pertinent information, to determine whether you qualify for credit or not.

What is a credit score?

A credit score is a number that evaluates your creditworthiness and is based on your credit history, as displayed on your credit report.

The higher the score, the more financially trustworthy a person is considered to be.

A 3-digit number tells you what your credit report says about how you manage your credit, and, along with other criteria, whether you should be granted more.

What exactly does your credit score number mean?

Generally, the higher your score, the better your credit record.

Scores range from 0 to 999, and is scored from poor to excellent. For example:

EXCELLENT: 767 - 999

GOOD: 681 - 766

FAVOURABLE: 614 - 680

AVERAGE: 583 - 613

BELOW AVERAGE: 527 - 582

UNFAVOURABLE: 487 - 526

POOR: 0 - 486

It is always in your best interest to maintain a good credit score.

The following factors impacts your credit score negatively:

Too much debt

Your account balances are too high

Late payments

Too many new accounts

Sebastien Alexanderson, the CEO of National Debt Advisors, says many people only check their credit score when it is too late, especially after applying for a home loan, vehicle finance, personal loans, or when a request for credit has been turned down.

“SA consumers are being reactive as opposed to being proactive,” he says.

“Just like it is important for us to be on top of our physical health, especially now during Covid-19, so we should strive to be fully informed of our financial health as well.”

Where can you get a credit report and how much does it cost?

You are entitled to one FREE credit report from every credit bureau once a year!

However, according to Transunion, one of South Africa’s leading credit bureaus, fewer than 5% of South African consumers make use of the legislation which entitles them to obtain their credit report free of charge from credit bureaus.

All credit bureaus are mandated by the National Credit Regulator (NCR) to supply consumers with a yearly credit report, so that they may be aware of their credit score and financial standing at all times.

You may access your free credit score from any of the following credit bureaus:

Compuscan: www.compuscan.co.za

Transunion: www.transunion.co.za

Experian: www.experian.co.za

XDS: www.xds.co.za

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What do you do if the information showing on your credit report is incorrect?

Irrespective of which credit bureau’s report you find the discrepancy on, you may log a dispute and request an investigation.

This normally takes about 21 working days to complete.

If the dispute is within the ambit of the credit bureau, they will do the investigation free of charge.

What is the “credit fix scam” people are always referring to?

People are desperate to access credit, and will go to great lengths to clear their credit records so that they may get it.

Fraudsters capitalise on this desperation. They will promise to “clear” someone’s credit profile, and promise to “remove their names from the blacklist”.

Popular scam alerts from “credit report fixers” to look out for include promises to:

Get judgements removed from your credit record

Rehabilitate your credit profile

Remove your name from the blacklist.

All of the above are normally offered at a fee. This is a scam and is illegal.

No unauthorised company, attorney, debt counsellor or individual can simply remove negative data from credit bureaus, regardless of how much you pay them.

Will the payment holiday granted to me by my bank during lockdown negatively affect my credit report?

It isn’t supposed to. Banks are supposed to inform the credit bureaus when you accept the terms and agreement of the payment holiday.

As we know, with the banks being closed, the NCR being closed and many organisations having technical and staff issues during the lockdown, there is every possibility that some things might have fallen through the cracks.

If you took a payment holiday, I would suggest that you access your free credit report (from every credit bureau), so that you can ensure that all is in order.

What do the terms on my credit report mean, for example what is a judgment?

A judgment is a court order granted against a consumer who has not paid their debts.

A judgment will remain on your credit report for 5 years; until the judgment is rescinded by a court; or is paid in full before the 5 years are over.

What is default information?

Default information is negative information supplied to the credit bureaus by your credit provider if you fail to pay your account, but legal action has not yet been taken.

“Defaults” usually remain on your credit report for 1 year, or until the debt is paid in full before the year is over.

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