Bank Better, Live Better
is your credit profile costing you?
All credit-active South Africans have a credit profile. Find out more about credit profiles, what your credit profile is used for, why blacklisting is a myth and how you can keep your credit profile clean.
What is your credit profile?
In the same way your CV tells a potential employer something about your career history and whether you have the right skills to do the job, your credit profile gives banks, businesses and certain individuals a picture of your financial history. It is used to determine whether you’ll be a safe future prospect for credit, a reliable tenant or even the right person for a job.
Why do you need a credit report?
A credit report is the information obtained from your credit profile that businesses use to gain insight into your money habits and history, which then helps them make a decision about whether they should lend you money or allow you to buy an item on credit.
It’s not just banks or shops that have an interest in your credit history – landlords, employers and insurers can also check your credit profile to see whether you have a history of paying debt on time. In the case of insurers, your credit profile can be used to determine how risky you are as a client – and this can affect the premiums you are charged.
A good credit profile can sometimes help you negotiate better interest rates when borrowing from banks. (If you’re wondering, credit bureaus only provide information that is allowed by the National Credit Act. Information such as your race and medical history are not included in these reports.)
The blacklist myth
Credit bureaus do not keep a special “blacklist” of individuals who do not pay their bills or are too risky to grant credit to. If you manage your debt well – make the required payments on time, or pay debt off early – it will be recorded. If you’re not so good with your debt, and miss payments or ignore warning letters, it will also be indicated on your credit record.
Negative payment behaviour – such as late payments or non-payments – can stay on your credit report for 24 months. Court information such as judgments against you can remain on your report for up to 5 years, or until you pay off the outstanding amount in full.
Your credit report includes a score based on your credit history. The higher your score, the better your credit profile, and the lower your risk of defaulting on an account or loan would be. Credit providers use this 3-digit number to get an idea of how risky it is to grant you credit.
Keeping it clean
Here are some tips to help you keep a clean credit profile:
- Pay the full instalment amount on time every month
- Budget – never buy on credit without knowing if you can afford the monthly instalments
- Never ignore a letter of demand for payment. Make a phone call or write a letter to explain your situation
- If you are unable to make a payment due to unforeseen circumstances, talk to the credit provider concerned and make alternative arrangements to pay back what you owe
- Pay your instalment even if you don’t get a statement. If you're not sure about the amount you can always call to find out
- Monitor your credit profile. You can request one free credit report per year from a credit bureau (see www.mycreditcheck.co.za or www.mytransunion.co.za)
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