Q&A - Are you “adversely listed”?

After a draining job hunt, you finally find the perfect fit at your dream company – heck, you even had the boss in stitches during your interview.

You receive the call you’ve been waiting for, but your chin hits the floor when they tell you that your application has been rejected, owing in part to an adverse listing on your credit profile.

Understanding the ins-and-outs of adverse listings can be complicated. To help you come to grips with it all, Kriben Reddy, vice president at TransUnion Consumer, joined us for a Q&A session.

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Kriben, though it's no longer in use, how did the term “blacklisting” originate?

It’s a historical reference to a time when credit bureaus only held negative credit information on credit-active consumers. Thus, if your name appeared at a credit bureau, you were considered to have been “blacklisted”.

Fortunately, with time, this practice has changed. Credit bureaus now list both positive and negative payment behaviours, based on the terms contained in consumers’ credit agreements.

This gives credit providers a more holistic view of a consumer’s credit status and behaviours. Credit bureaus therefore don’t keep a “blacklist”. Instead, they provide a reporting service to credit providers for the purposes of helping them to assess a consumer from a credit perspective.

It’s important to note that credit bureaus play no part in lending decisions. At the end of the day, it’s the credit provider that makes the decision to accept or decline a credit application.

What are adverse listings?

Adverse listings refer to negative information contained in a consumer’s credit report, such as:

• Overdue account – this is an account that has not been paid on time, as stipulated in the credit agreement. Accounts are usually deemed overdue when payment is delayed by 30 days or more.
• Default – a credit provider can list a consumer as defaulting on a credit commitment if they have not met the agreement terms. This generally happens when payment is overdue by 90 days or more.
• Judgements – a credit provider can take further steps on an overdue credit account by applying for a court judgement against a defaulting consumer.
• Notices – a credit provider may take additional legal action in the form of a notice, which can include an administration order against a defaulting consumer.

What steps should an individual or company take if they want to adversely list someone?

Applying an adverse listing against a consumer or organisation is a complex process that is strictly regulated by the National Credit Regulator under the National Credit Act.

Only registered credit providers, the courts, and utility providers can make a negative listing against a consumer. However, they cannot do this in isolation - they are required to list all applicable credit data, both positive and negative, that they have for the consumer.

The credit data submission process is governed by the South African Credit & Risk Reporting Association and the Credit Bureau Association.

If you find that you have unfairly received an adverse listing, what can you do about it?

If the consumer has not already done so, they should contact a credit bureau, such as TransUnion, to get a copy of their credit report. By law, every credit-active consumer is entitled to one free credit report every 12 months from the credit bureaus.

If the credit report reflects an apparently inaccurate adverse listing, the consumer can log a dispute with any of the active credit bureaus in South Africa.

The bureau will ask them to submit relevant documentation to support the claim. This dispute is then logged for verification with the organisation that made the negative listing. This process is legislated and takes 20 working days.

Consumers are cautioned not to take chances with this process. Where the dispute is found to be invalid, this is recorded on the consumer's credit report for a period of 12 months.

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If you find you have correctly received an adverse listing, how can you improve the situation?

The type of adverse listing will determine the correct course of action. 

Once paid up, defaults and judgements may be automatically removed. However, if a consumer wishes to expedite this process, they can log a dispute with the credit bureau. They will need to submit all relevant documentation, including a paid-up letter from the organisation that listed them. Again, this process can take up to 20 working days.

A notice will require the submission of a rescission court order, in order for the credit bureaus to remove the record.

Overdue accounts cannot be removed and will remain on a consumer’s credit report for 24 months. A default will remain on a consumer’s record for a year.

Paid-up defaults are removed once confirmation of paid-up status is received from the credit/service provider, while judgements remain for a five-year period, or until the account is paid in full. 

Notices include administration orders, provisional sequestration, sequestrations and rehabilitation orders.

• Administration orders remain on your credit report for five years;
• Rehabilitation orders remain for five years; and
• Sequestration orders remain for five years, if no rehabilitation order is granted.

If the adverse listing can’t be removed, what should you do?

You can focus on improving other areas of your credit report to try to offset the impact of the adverse listings.

Broadly speaking, there are four things a consumer should focus on:

• Pay your accounts in full and on time in accordance with the credit agreement. This is usually monthly, and credit providers view a long history of up-to-date credit accounts positively.
• Keep your utilisation of available credit low, especially for unsecured credit accounts. In general, maintaining balances at around 30% of available credit is considered prudent.
• Try to show a good mix of secured and unsecured credit accounts. A variation of credit types shows credit providers you are able to manage different types of credit commitments.
• Lastly, don’t shop around for too much credit at the same time. Too many applications in a short space of time signal to credit providers that your financial status has changed recently, and it is a leading indicator of financial distress.

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