Recent statistics indicate that a vast number of South Africans – estimated by the National Credit Regulator (NCR) at 10.4 million – have impaired credit records.
Compuscan confirms these shocking statistics, noting that in 2015, 41% of the 22.5 million credit-active consumers in South Africa had credit scores qualifying them as “very high risk” borrowers.
But what exactly does this mean and does it affect you? Do you know what’s in your own credit record and who can access it?
What information is in my credit record?
A credit record identifies you and describes your credit history (your history in terms of repaying debts). For example, it might include information about your repayment of a bank loan, a mortgage and a balance owing on a credit card.
Your credit record includes the following kinds of information:
- the number of accounts you have
- any legal judgments, notices, defaults (late or missed payments) or collections against you
- your total balance exposure, meaning the total amount you owe
- the total overdue amount
- credit enquiries you’ve made.
Credit providers send this information to one or more credit bureaus, which compile it into comprehensive reports. Based on how well (or poorly) you’ve settled your debts in the past, they also assign you a credit rating. This is a score out of 1,000 points.
Who sees my credit record?
Credit providers, like banks, check the information held by credit bureaus when deciding whether to grant you loans. If you have a low credit rating, they’re likely to refuse you a loan – or they may offer you much less favourable loan terms.
Service providers like insurance companies, landlords and potential employers may also access your credit records. In some cases, credit bureau records can even ruin your chances of getting a job.
How do I check my own credit rating?
It’s worth noting that credit bureaus frequently make mistakes, or fail to update credit records once debts have actually been settled.
By law, you’re entitled to one free credit rating each year.
It’s important to check your own credit record so you can dispute any errors or outdated information. Otherwise these could negatively affect your ability to secure credit – and possibly even prejudice a potential employer against you.
You can get a one-off free credit report from any of the four main credit bureaus in South Africa via the following web sites:
Getting a loan if you have a low credit rating
If you have assets of value, such as a paid-off vehicle in your name or valuable antiques or jewellery, one option for securing credit is a short-term asset-based loan, like those offered by Lamna.
You provide an asset as collateral for a loan. Once you’ve repaid the loan with the agreed interest, the asset is returned to you.
For more information about using an asset to secure a short-term loan, contact Lamna on 086 111 2866 or simply complete and submit our online application form
ILLUSTRATIVE EXAMPLE
Client borrows R10,000 for 90 days.
Loan Amount | Repayment Period | Monthly Interest | Total Cost of Loan | Initiation Fee | Monthly Fee | APR |
|---|---|---|---|---|---|---|
R10 000 | 3 months | R500.00 | R2 914.50 | R1 207.50 | R569.00 | 60% |
Fixed rates range from 36% to 60% APR and payment options range from minimum 3 to maximum 24 months. Apart from the initiation and monthly fees shown below, the only additional fee is credit life insurance if the borrower does not have this already.