A Fin24 reader writes:
I am a full-time employee earning above R24 000 a month. I
have a savings fund, retirement annuity, life insurance and medical aid cover.
Since about a year ago, I also have a credit card from Absa.
My car is paid off, I'm renting accommodation and I have no
I recently applied for an account with a home store chain,
thinking it would be a good way to buy furniture instead of using my credit
card. I also wanted it as proof of my new residence, since certain
organisations no longer accept a police affidavit as proof of residence.
My application was denied, presumably because I have not
built up a credit record.
Why am I being penalised for being smart with what I
have? What am I missing here? Are
savings and no debt no longer the way to live?
The National Credit Regulator responds:
The National Credit Act (NCA) furnishes consumers with
certain rights and obligations. The NCA provides that every person has the
legal right to apply for credit from any credit provider.
This right, however, does not prevent the credit provider
from turning down your application. If your application is turned down, you
have the right to be provided with reasons.
However, it should be noted that the decision to grant
credit to a consumer is the business decision of the credit provider based on
its risk management principles.
In terms of the NCA, the credit provider is required to
conduct an affordability test. This should assess the consumer's:
- understanding of
the risks and costs of the proposed credit;
- debt repayment
history of credit agreements; and
- existing financial
means, prospects and obligations.
It is also important to shop around because different credit
providers have different assessments and credit policies for applicants.
Our advice is that you ask the store why it is declining
your application, and how you can go about rectifying the situation so that you
will be granted credit with it.