Know your credit status

In a recent campaign for consumers to know their credit status, the National Credit Regulator (NCR), in partnership with the Credit Bureau Association (CBA) and the credit bureaus, came out to urge the public to visit any of the 14 registered credit bureaus to access their free credit reports.

This was in aid of “educating consumers about credit information, credit statuses and credit scores,’ said the NCR.

According to education and communication manager for NCR, Mpho Ramapala there is a significant decrease in issued credit reports over the last year, resulting in fewer people knowing their credit status.

"Statistics (for the quarter ended June 2015) show that out of 23.37 million credit active consumers, over 157 000 credit reports were issued to consumers at their request. Out of the credit reports requested, 65.5% (102 967) were issued without charge, and the remaining 34.5% (54 283) were issued with charge.” Said Rampala.

With a 25.4% decrease in reports issued from the same quarter last year, it is evident that consumers don’t know their credit status.

What a credit report entails?

The CBA’s executive manager, Naudé Viljoen, revealed that the credit reports are not synonymous with regular payments as every individual nationwide (regardless of whether they pay their accounts as they should) who has a registered account with a credit service provider, is privy to a credit report.

Viljoen then went further in saying: “Credit bureaus hold both positive information, such as consumers paying their accounts on time, and negative information, for example when a consumer has fallen behind or defaulted on payments.”

Importance of knowing your credit status

Managing one’s credit status and activity is of vital importance if we are to maintain a healthy credit record.

“The purpose of listing information collectively at the credit bureaus is to create a comprehensive view of the consumer for both prospective and existing credit and service providers, to assist them in evaluating new credit or account applications, and also to assist in the management of their relationships with their customers,” added Viljoen.

Intelligent Debt Management’s (IDM) marketing co-ordinator, Bhavesh Naran, added, “Understanding your credit status is important so that consumers are aware of their financial situation. Once aware, it makes it easier to identify ways in which you can improve your credit status. For example, if you have defaulted on any accounts or have judgments, you should be concentrating on getting these accounts up to date so that you can remove any obstacles that could prevent you from securing credit in the future, without neglecting your other accounts.”

Naran went further in outlining that being in the know about your status and maintaining it accordingly prevents you from being denied future credit opportunities on the grounds of you not being “credit worthy”. “Your credit status is an attempt to quantify your risk for lenders contemplating lending you money. The more “credit worthy” you are, the better your chances of being granted a loan. A clean credit record is also a potential bargaining tool for negotiations for a lower interest rate.”

Obtaining your credit report

Ramapala further reminded customers that they are well within their rights, under the National Credit Act (NCA) to receive one free annual credit report. If a consumer requires any additional credit reports throughout the year, they are available at a fee from any of the country’s credit bureaus.

Challenging credit report information

Just as the consumers have a right to access their information they too can challenge it. This right is protected under the NCA, as they give one the chance to question and challenge the information on issued credit reports.

“When challenging the credit bureau record, the consumer needs to contact the credit bureau that issued the credit report. The credit bureau has 20 business days to investigate the matter,” explained Ramapala.

A credit bureau investigation into the report will then be conducted, should the consumer then still be dissatisfied with the outcome, or have not received feedback within 20 business days, they are welcome to take the matter up, free of charge, with the credit ombud’s office, granted they have received a reference number from the credit bureau. 

How can you improve your credit score?

Naran identified the following as ways in which you as a consumer can start improving your credit score today.

1. Pay on time: 

Paying on time is vital to your credit score. Payment history can contribute as much as 25% of your overall score. Each time you make a late payment it is noted and your score decreases. Setting up a debit order makes this easier and ensures you never miss a payment,” revealed Naran.

2. Pay your credit cards off:

Ensure that you are making regular payments to keep your balance down, this indicating that you are able to maintain and remain in control of your debt and finances.

3. Don’t take on too much debt:

“Try to have only one credit card and one major item of debt (i.e. car or home loan). Never max out your credit cards and try and keep the outstanding balance below half of your credit limit. Avoid taking on more credit whilst you are paying off other debts. If you are planning to apply for a big loan, first pay off all balances which are close to their limits. Tackle those with highest interest rates first,” added Naran.

4. Choose idle accounts: 

Having less credit agreements and obligations makes you appear less risky to creditors. Be sure to close all unused accounts and notify the credit bureaus that you have done so.

5. Refrain from applying for credit too often:

Frequently applying to different credit providers can take up to 10 percent off your score and this is noted every time a provider runs a credit check on you, this counting against you. 

6. No history, no credit:

“While having too much debt is obviously bad for your record, having had too little will also count against you,” highlighted Naran.

The duration of your credit score can add up to 15 percent of your credit score.

“If you have no, or a very short, history of credit then credit providers won’t be able to trust that your credit score is an accurate reflection of your credit worthiness.

If you want a loan but have no credit history, consider getting a credit card and pay it off completely each month. In this way you’ll indicate that you’re a responsible debtor that won’t cause the lender trouble,” stated Naran.

He further advised using an online comparison tool to find a fee-free card and pay it off before the interest rate expires.

7. Check your spouse’s rating:

Creditors also have access to your spouse’s credit record and this could possibly have a negative bearing on you.

8. Make arrangements to pay:

“If you find it impossible to make a payment, talk to your creditors and make arrangements to pay when you’re able to. Contact them as soon as you foresee trouble; don’t wait for them to contact you,” concluded Naran.