If you've been declined for a loan lately or have had difficulty in getting someone willing to rent out their home to you, chances are that your credit record is not as healthy as it can be.
If the words 'credit score' flummox you somewhat you are not alone. According to a mini poll conducted by our sister website, Moneybags, 73% of people (218 out of 298 voters) that participated in the poll had no idea what their credit score is. Only 27% (80 voters out of 298) knew their credit score.
For those of you who are still in the dark about what a credit score actually is, Michelle Dickens, managing director of credit bureau TPN explains: "A credit score is a way of trying to take into account all of the information on your credit profile and reduce it to a score which categorises the potential risk or lack thereof of a consumer. Essentially, the credit bureau score will take all the information on the credit profile and weight it on whether it is a risk or not. Things like judgements and default will rate more negatively than an enquiry on your credit profile, for example."
To get up to speed with your credit report and score is a simple exercise. There are a number of credit bureaus (see below for a list) that you can approach and, what's more, your first one for the year from each bureau is free. Thereafter, if you want to check your report again a small admin fee of around R20 is charged.
There is some uniformity in terms of what gets put into a credit report. Things like judgements, adverse information and defaults are reflected by all the bureaus and they all have dedicated sections in their report for such credit information. Not all bad information is stored on your credit report though, positive information is recorded too. So if you are a prompt payer, this should be reflected.
Improving your score
If your credit report is littered with judgements, adverse actions, and defaults, or if it's just not looking on the healthy side, there are a couple of things you can do to get yourself back on the right track. Dickens advises the following:
1.Reading the report thoroughly to find any inaccuracies. "If you find any go to the bureau and update it with any information or tell it if there are any inaccuracies in the report," says Dickens.
2.Get to grips with your credit profile: Get a copy and understand what it means. There is no standard to how a credit report is created. It can be incredibly confusing when you look at it for the first time. There are even technical abbreviations on payment profile information and TPN, for instance, colour code their reports dependent on whether an action is good or bad.
3.Always pay your debt on time and in full. "Don't make half a payment," says Dickens. "Also don't make a late payment just because the payment date falls on a public holiday or on a weekend. It will reflect on your credit report if you don't pay on time."
4.Look at your total credit exposure: Just because you have access to a lot of money doesn't mean it's a good thing. "You may have a credit card with a R100,000 limit on it that you don't make use of. But this gets added up. If the credit available to you is incredibly high it may be more difficult to obtain credit such as a home loan because you've got access to these facilities," warns Dickens.
Remember that the National Credit Act is there to protect you, the consumer, if anything goes wrong when applying or dealing with credit and credit reports. "It protects the consumer in a number of ways and especially in terms of the amendments which are due to be signed in three weeks from now. It now ensures that there are better affordability assessments to reduce the likelihood of reckless lending. There are rules around the accuracy of information, how it's stored and where it is stored."
But that doesn't mean that credit providers don't have any recourse if you are failing to repay your debt or make late payments. If a consumer steps out of line then it's legislated that companies can take steps to recover their money too. "Credit bureaus are entitled to log it and credit providers are entitled to use it in their assessment," adds Dickens.
Some credit bureaus you can contact for your report:
Compuscan: https://www.compuscan.co.za/contact-us/
Transunion: http://www.transunion.co.za/home_en.html
Experian: http://www.experian.co.za/
TPN: http://www.tpn.co.za/Guest/home.aspx
XDS: http://www.xds.co.za/
*Kudough: http://www.kudough.co.za/.
* Justmoney has partnered with Kudough which, for a fee, will provide you with reports from Transunion (ITC), Experian and XDS.