Applications for credit decreases

The National Credit Regulator (NCR) has issued the Consumer Credit Market Report (CCMR) and the Credit Bureau Monitor (CBM) for the quarter ended March 2015.
 
The CCMR indicates that the number of applications for credit has decreased by 9.87% from December 2014 to March 2015 (quarter-on-quarter) from R117.64 billion to R107.54 billion.
 
However, the CCMR noted that year-on-year (comparing March 2014 to March 2015), the value of new credit grant had increased.
 
“The total value of new credit granted decreased from R117.64 billion to R107.54 billion for the quarter ended March 2015, a decrease of 8.59% when compared to the previous quarter but an increase of 1.83% a year ago,” stated the CCMR.
 
The types of credit that were examined include, mortgages, secured credit (such as vehicle finance), unsecured credit (which means the loan is not secured by collateral) and developmental credit.
 
According to the National Credit Act, there are three types of developmental credit, “loans for educational purposes, loans to build, expand or improve low-cost housing and loans to set up small and medium-sized businesses.”
 
Credit-active consumers
 
According to the CBM, “there were 23.11 million credit-active consumers as at the end of March 2015.”
 
South Africa’s credit bureaus hold the information of more than 47.02 million consumers, however, only 49.1% of these are credit-active consumers, the remaining 51.9% of records simply contain identification information and no credit activity.
 
The number of credit-active consumers has increased by 1.4 million year-on-year.
 
Credit ratings
 
The number of consumers who are in good credit standing has increased by 118 000 to 12.70 million. However, as a percentage of the total number of credit-active consumers, this is a decrease of 0.8% year-on-year. A total of 55% of all credit-active consumers were in good standing.
 
This decline in year-on-year figures indicates that the number of consumers with impaired records (a bad credit rating) also increased over this period. At the end of March 2015, the number of consumers with an impaired record increased by 146 000 to 10.41 million.
 
The CBM explained: “The percentage of credit-active consumers with impaired records increased to 45.0%, comprising of 22.4% of consumers in three months or more in arrears, 12.2% of consumers with adverse listings, and 10.4% of consumers with judgments and administration orders.”
 
Accounts
 
There was a recorded 82.04 million accounts on record at the credit bureaus at the end of March 2015. This is an increase of 6.3% year-on-year, indicating that people have taken on more credit. However, overall the number of credit applications has declined.
 
The reason that number of accounts is so much higher than the number of credit-active consumers is that people have multiple accounts not only with the same provider but with others also.
 
Of these accounts, 64.7% were classified as current, while 72.7% (59.66 million) were in a good credit standing.
 
The findings also reveal that:
·         8% of these accounts had one or two missed instalments, a decrease of 1.4% year-on-year.
·         19.8% of accounts had three or more missed instalments, an increase of 0.9% year-on-year.
·         5.1% had adverse listings, a decrease of 2.5% compared to March 2015.
·         2.3% of the accounts had judgments or administration orders against them, an increase of 0.4% year-on-year.
 
Credit reports
 
Consumers are entitled to one free credit report from each credit bureau per year. According to the CBM, there were only 149 222 credit reports issued to consumers during the period ended March 2015.
 
Of these reports, 45 451 (30.5%) were issued with change, which means that consumers disputed information that was recorded on their credit report, and this error was corrected.
 
According to the CBM, 22 912 disputes were lodged in the quarter ended March 2015. Of these disputes, 15 349 were resolved in favour of the consumer (meaning that the credit bureau had recorded incorrect or inaccurate information), while 3 371 reports were issued unchanged.
 
Nomsa Motshegare, CEO of the NCR, has advised consumers to “continue to exercise the necessary caution, live within their financial means and borrow responsibly. Those experiencing financial distress must make arrangements with their credit providers or seek assistance from any registered debt counsellor.”
 
For more information on credit reports, click here.