A credit report is a document which contains information on your credit history and financial dealings. It clearly shows how you handled your debt in the past: How much you borrowed, from whom and if you repaid it on time.
If accurate, you cannot alter the information on your report. If, however, there is a factual mistake on your report, you can dispute the information. If it does turn out to be an error, the credit bureau must correct it.
The term “blacklisting” or “blacklist” is a term still widely used among South African consumers. “Blacklist” is a misleading term, a category that dates to when credit bureaus only kept negative information.
Now credit bureaus hold both positive and negative data, the combination of which has proved immensely beneficial in predicting the future behaviour of consumers. Today, it simply means that you have an account with a credit service provider who makes use of credit bureau services.
Often credit checks bring up long-forgotten bad credit decisions, but that low credit rating can change. As hopeless as the situation may seem, bad credit won’t last forever. Your credit profile is a “snapshot” of how risky you appear to be at any particular point in time. The snapshot changes as new information is added to your bank and credit bureau files.
That’s good news for consumers with less-than-perfect credit. Even if you’ve mishandled credit in the past, you can build up your creditworthiness by handling credit more responsibly, both now and in the future.
You can enhance your credit report if you know what it contains. Although you can’t rewrite history, there are steps you can take to improve your rating. Contact your lenders. They will work with you to set up a different payment schedule or interest rate. Ignoring the situation will only add to your problems. It never hurts to ask. Pay your bills on time. If you have an overdue bill, an unpaid debt, pay it off. Set up a budget and live within it.
Your credit report contains your credit history. Credit is a type of agreement which lets you receive goods, services or money now and pay for them in the future. The repayments are normally made by monthly instalments and you are charged an interest rate, which is a percentage of what you owe. Interest is the cost of using OPM (Other People’s Money) Most people would see it simply as borrowing money in one form or another.
Credit providers use your credit score to measure their risk in taking you on as a client before they approve or decline your application for credit, or for an increase in your credit limit.
The most common types of credit are mortgage bonds (typically a property loan used to buy a house), personal loans, overdrafts (where a bank allows you to “overdraw on your cheque account which results in a negative balance) and credit cards. But there are many other situations where you obtain credit, though you might not realise you’re doing it. For example, mobile phone contracts spread the cost of your phone over the length of the agreement. Utility bills also count as credit, because you receive the utilities before you pay for them. Most adults have at least one form of credit or will borrow in the future.
Things that appear on your report:
Personal information (name, date of birth, ID), your address and employer information
Court judgements, admin orders and sequestrations
Bankruptcies and whether or not you’ve defaulted on any debts.
Credit account information: how much you owe and whether you have paid on time, the age of the account (including bonds, credit cards, store cards)
Enquiries carried out on your account
Fraud that has been committed using your name or any fraud that you’ve committed using someone else’s name
And things that don’t:
Current account information (unless you have an overdraft)
Savings account information
Parking or driving fines
Information about gender or ethnicity
A lot of the information in the credit report is confidential and that’s why specially licensed credit bureaus oversee holding it. The four bureaus in SA are Experian, TransUnion, Compuscan and XDS.
What are credit bureaus?
Credit bureaus are companies which collect information on the credit rating of individuals. The information comes from lenders, mobile phone companies and utility companies. This information is stored and organised by the agency so that it can be easily used by potential lenders to assess a person’s credit risk.
These agencies are connected with the different banks, lenders and credit card companies which pass on your information and details when you borrow money. As all the information from the different lenders is stored in one place, it is easier for a prospective lender to access it when they want to understand your borrowing habits. However, companies and individuals cannot simply check your report – it’s private. They need permission from you which is normally part of the application process for loans and other forms of credit.
What is a statutory report?
Everyone is entitled to a statutory credit report once a year which the credit agencies are obliged to provide for free. You can also request it more than once a year, but for a fee that is not to exceed R20 at each additional time of request. The document you’ll receive is a simple print out or online version of your report and will not provide you with any supporting information or your score.
In a nutshell:
A credit report is a document that contains your credit history and other personal information
If the information on your report is correct, you can’t change it. If it contains mistakes, you can dispute the information with the lender or credit bureau
Only licensed credit bureaus can hold your credit report.
Everyone is entitled to a free statutory credit report from the credit bureaus once a year
Always ensure timely payment of all instalments due. If you are already in arrears, it is recommended to make additional payments in order to decrease the arrears until all accounts are up to date. The impact of arrears on a score will be determined by the seriousness and the recency of the arrears.
The ratio between the current outstanding balance and the credit limit on revolving credit such as credit cards and store cards can impact your credit score. Lowering your utilization by paying off some of the debt can have a positive impact on your credit score.
Length of credit history
Your credit score can improve as your credit history ages, assuming that you make regular payments on your accounts. Before opening new accounts ensure that you will be able to cover the potential additional instalments.
Types of credit used
It can have a positive impact on a score if you are able to manage different kinds of debt successfully. Broadly speaking debt can be classified into instalment (personal loan, bond), revolving (credit cards, store cards), and open accounts (cell phone account, security). It is not recommended to open new accounts just to improve your score, as a high number of new accounts can negatively impact your score.
Negative listings such as judgements and defaults can have a negative impact on your score. It is recommended to pay off any judgements and follow the recommended steps to have the judgements rescinded. Pay off all debt related to defaults. Once you have paid up a default you can instruct the credit provider to request that the default be marked as paid up.
No score allocated
No score will be awarded should you be under debt review or under administration as you may not be approved for any additional credit. If your credit history is very young you will not be awarded a score. If you do have accounts, you should receive a score in a few months’ time.