Understanding your credit record

You only become aware of just how important it is to have a good credit record when you’re applying for credit – perhaps for a store account to buy school uniforms, or when applying for a bond for your first home. In 2014, South Africa’s household debt to disposable income ratio was a shocking 78.4%, meaning more than three quarters of household income goes towards paying off debt.

A bad credit record will haunt you
If you haven’t been diligent about paying your debts, in time, and in full, then it might come as a shock to find out that this information has been stored in a central place, and is available to banks, retailers and anywhere else you might be thinking of applying for credit. Worse, it could take months or even years to rectify, stalling your plans.

‘Can I see my credit score?’
South Africa’s two main credit bureaus are Experian (www.experian.co.za) and TransUnion, formerly ITC (www.transunion.co.za). By law, you are allowed to receive a free copy of your credit record once a year that reflects your credit score, so that you can check that it’s accurate and be made aware of any legal proceedings against you. You can log disputes through the bureaus if you believe the information they have is incorrect.

What is blacklisting, exactly?
If you are listed as a slow-payer, this means you have an account that is in arrears. This can be rectified within a few months. Simply pay the instalments on your accounts on time for the next 6 consecutive months (this includes no debit orders “bouncing” out of your accounts) and your credit score will improve.

Being blacklisted, is a time-consuming and often costly exercise to rectify – between 2 and 5 years. You won’t find the word “blacklist” on your credit record. Rather you will find the words “default” or “judgment”.

• Default: This means your account has been handed over to lawyers. You’ll need to pay back the debt, and will incur extra charges levied on the outstanding debt by the lawyers. Even once you have paid off the debt, the default will remain on your credit record for two years.
• Judgment: When a judgment is made against you in a court of law. Even once you have paid off the debt, the judgment will remain on your account for at least 5 years.

If you want to get financially fit and shed that bad debt, Absa’s debt counselling service will help you consolidate your debts and pay them off, with enough to live on after making instalments. If you enter the debt review process, you can open an Absa Solutions Account, a basic cost-effective account that will help you manage your monthly budget and repayments.