For the record: Everything you should know about your credit record

You’ve probably heard of the elusive credit record. Though it goes by a few different names, from record to report to score to history, it’s common knowledge that it exists, and, in some way or other, affects our access to credit. However, most people just simply don’t know enough about their credit record, what it is, how they can access it, and what it actually means in a practical sense.

In order to separate fact from fiction and give you the information that really matters when it comes to your credit record, we sat with Peter Mpahlele: Chief Risk Officer- Debt review and customer forbearance Retail Business Banking Risk, Henriette Vlok: National Manager – Absa Unsecured Credit Lending, and Derek Venter: ‎Head – Retail Unsecured Risk at Barclays Africa, to talk all things credit.

So what exactly is a credit record and why should I care?

Your credit record is a detailed summary of your credit performance over the course of your recorded credit history. There are many factors that make up your credit record, such as your payment history, judgement values, the number of credit lines you make use of etc. In this way a holistic picture of the health of your credit profile is painted.

You can view your credit record/report by visiting either the Transunion (https://www.transunion.co.za/), Experian (https://www.experian.co.za/), or Credit Bureau (http://www.creditbureau.co.za/) websites, where you can obtain your first report free of charge.

This credit record is the first thing and most important thing that the bank looks at when assessing your credit eligibility and determining whether you qualify for further lines of credit. Using your credit record, the bank will rank you in terms of your risk profile and subsequently make the decision to decline or price your credit request. So it is essential that you maintain a healthy credit record over your financially active life in order to ensure that you are eligible for further credit, should you require it.

A practical application would be if you applied for a loan, for instance. The bank would pull up your credit record and thoroughly assess it before making the decision to grant you the credit for the loan, the loan-to-value (LTV) ratio you qualify for, the loan limit and the repayment term. All of these factors will be more favourable if you have cultivated and maintained a healthy credit record.

But what are the consequences of a poor credit record and how can I resolve this?

The worst result of a poor credit record is being declined on future credit applications, which can really put a dent in your plans when you’re in desperate need of a loan. Perhaps the biggest contributing factors to a poor credit record are legal judgements, wherein a court rules against you for not paying your debts, and over-commitments, wherein you have too many payment profiles on your credit record. Judgements in particular are a major issue, as they will reflect on your credit record for up to 3 years or longer.

Even if you have paid your judgement fees, it is essential that you double check that these have actually been cleared from your credit record, as they aren’t always cleared automatically. The onus is on you to ensure you contact the Credit Bureau to clear paid judgements.

It’s not all doom and gloom, however, as Derek gave us his expert advice on how to ensure your credit record stays healthy:

• Ensure you pay all of your commitments on time, don’t allow yourself to get into a cycle of bad debt.
• Ensure you know the instalment amounts on your loans and the debit order dates for these, so that you can make sure you have sufficient funds in your account.
• Missing even a single payment will reflect badly on your credit record
• Avoid taking up too much unsecured credit
• Never overcommit yourself with too many loans and debts
• Don’t take on more debt to pay off existing debt: it becomes a vicious cycle!
• Avoid loan sharks
• Revolving credit with multiple credit cards is a bad idea, just don’t do it!

And if it’s already too late and you find your credit record is in the red, Henriette suggests trying these to rescue your record:

• Focus on clearing the arrear amounts on your record with the Credit Bureau and ensure your accounts are up to date
• If you have any judgements against you, make sure to pay those off ASAP and clear these from your record with the Bureau
• Focus on paying off and clearing your unsecured debt first, then secured debts. Unsecured debts are seen as a higher risk.

Oh, and if it seems likely that you’re heading for financial difficulty and a period of bad debts, help is on hand! Absa offers a forbearance service that will help you manage your debt and ensure you don’t sink further into a sticky financial situation. You can learn more about forbearance here

What else should I know about my credit record?

“Customers just need to understand that when they pay their accounts on time their credit record will improve. If you don’t pay on time it will lead to a negative credit score. It’s about balance and it’s really quite simple” Says Peter.

“It is crucial that you assess your affordability based on interest rates: when the interest rate goes up your installment goes up. If you change employers, and your salary payment date changes, come into the bank and supply us with a convenient date to trigger your debit orders based on this.”

“Have a close relationship with your bank. Many customers sign up for debit orders and aren’t aware that if the rates go up, their installment goes up, if they have a fixed debit. It is advisable to chat to the bank and check if your debits have gone up.”

“Understand your affordability, be prepared for tougher times and be aware of what is going on around you.” Peter advises.

Just remember that maintaining a good credit record is going to affect your access to further lines of credit in future and long-term thinking is essential!

Handle your debts responsibly and there is no reason you can’t build a happy, healthy credit record.