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How to Buy & Sell Property
How to improve your credit rating
APPLYING for credit can be a stressful experience if you haven’t managed credit well. And
with increased financial pressure on the average person today, the number of people with
low credit scores is increasing in South Africa.
Data from the World Bank shows that in the
2013–14 period, South Africa was the world’s
number-one country for people needing loans.
Recently, it was reported that half of the
country’s 19 million credit-active citizens
have impaired credit records (defined as three
months or more in arrears), while 15% are
debt stressed (one to two months in arrears).
This equates to more than 11 million credit active but over-indebted South African consumers. To put this country’s level of over-indebtedness into perspective, it is estimated that
more than half of all South African consumers
owe 75% or more of their income to creditors.
While South Africa’s poor economy is a factor, a shocking fact is that many South Africans
don’t know — or don’t care — about managing credit. Debt management firms report that
when analysing clients’ debt they often find
a lot of non-essential expenditure or spend-
SA is the world’s #1 country for people needing loans.
ing on luxuries. Personal loans top the list
where South Africans have outstanding debt,
followed by credit cards and store accounts.
In fact, expenditure on a home mortgage was
the smallest category of debt spending. To
realise that many South Africans spend more
on clothes than on a roof over their head is a
sobering thought indeed.
How to manage your credit record
It is important to maintain a healthy credit
score, so that you can successfully apply for
credit when needed. Follow these tips:
• Always pay the amount due by the date due,
and don’t skip payments. The longer you consistently pay bills on time, the better your
credit score will be.
• Don’t have too much credit, and limit the
amount of credit you expend on consumption
(food accounts, clothing accounts, etc).
• Too little credit can also work against you.
But don't open a whole lot of new accounts too
rapidly. This looks dodgy and will lower your
average account age and overall credit score.
• Closing an account won’t make it go away. It
will still be visible on your credit report.
• Credit cards and instalment loans will raise
your score — if paid consistently on time.
• You can get one free credit check a year.
Check for any errors through one of the credit
bureaus and get them corrected (see below).
• Close the gap between your due amount and
your credit limit.
• If you are struggling with debt, speak to a
debt counsellor. These are credit experts registered with the National Credit Regulator,
and are qualified to give you advice and help.
How to fix a bad credit record
As the above shows, your credit score is a reflection of your credit behaviour history. How
long this behaviour is kept on record varies:
Payment History can be kept for two years;
Adverse Listings from two to five years; Judgments for five years. Cleaning up your credit
profile will take some work, but it can be done.
VISHAL MAHARAJ
44 Chase Valley Road, Pietermaritzburg 3201
PO Box 2080, Hilton Gardens, 3245
Tel: 033 345 5514 / 083 231 6020 • Fax: 0866 841 805
Email: [email protected]
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• First, check your record with all credit bureaus to know the problems you must address.
• Next, get “Confirmation of Settlement” letters from all credit providers with whom you
have settled debt.
• After this is done, judgments on your credit record need to be tackled by approaching
attorneys who got the judgments against you
and asking them to rescind these now that you
have resolved the debt.
• If you have any slow payer or default listings
in your record, approach the credit providers
who reported this and ask them to remove the
listing on the grounds that you have settled the
debt. Be aware that they don’t have to do this,
so this is where diplomacy is called for.
• Finally, you should tackle the thorny issue of
the “Payment History” section of your credit
record, something that has a huge effect on
your credit score. Unfortunately there is not
a lot that you can do here, as this lists how
you’ve been paying over the previous two
years. “Time heals all wounds,” it is said, and
this is true of this issue too. Every month you
pay an account on time moves a bad payment
record down the list. Within six months or so,
your credit score will improve. Getting a small
loan with small repayments, and paying on
time every month, is a “trick” that can help
too. A loan carries a better score with credit
bureaus than a retail account, and if you pay
it back responsibly — perhaps even paying
earlier and paying a bit more than the monthly
amount due — this can boost your credit score
while rehabilitating your payment history.
For more help, contact the Office of the
Credit Ombud, an independent and impartial
body that offers free assistance with complaints relating to incorrect credit bureau information, or disputes with credit providers.
Phone 0861 OMBUDS (0861 662837) or SMS
“Help” to 44786. For more information go to
http://www.creditombud.org.za