Johannesburg – For anyone who is less than disgustingly wealthy, having a clean credit record is crucial for getting on in life.
Particularly if you want to get finance to buy a house or expand your business – and even to secure some types of jobs.
Credit bureaux use official records (like court verdicts) as well as payment histories from shops and banks to build up a file on how you handle debt.
It will contain all the good stuff (when you paid on time), but all the bad stuff (defaults) too.
Before extending credit to you, a bank or retailer will look at your file to verify that you have a good debt track record.
In the three months to end-December, 146.88 million credit checks were done on 15 million South Africans.
When your credit record is inaccurate
Before applying for a loan, check your credit report first to avoid nasty surprises. All South Africans are entitled to one free credit report a year. A credit record costs R20 if you want more than one.
Thousands of people have found incorrect information on their records.
According to the latest data from the National Credit Regular (NCR), the number of disputes over credit record information has leapt by almost 18% to more than 10 500 in the last quarter of 2009.
If the information on your credit record is incorrect, you have to challenge the credit bureau, which is legally obliged to remove it until the query has been resolved.
Your first step should be to gather all documents and other evidence to show that the information is inaccurate, said Nomabali Mapela of the Credit Bureau Association.
Contact the relevant credit bureau (the four main credit bureaux in SA are Compuscan, Experian, Transunion and XDS), which has to investigate the dispute and respond within 20 business days.
"If a consumer applies for credit during this time, the credit provider will see that there is a dispute on the record but will not be able to view the disputed information during the investigation period," said Mapela.
Should the information prove to be incorrect or unsubstantiated, it will be removed.
If you are unsatisfied with the way the credit bureau handled your situation, contact the office of the Credit Ombud (http://www.creditombud.org.za).
When (sadly) your credit record is correct
If you have unpaid debt on your credit record, there is at least one consolation. You are not alone.
Currently more than 45% South Africans who use credit are struggling to repay debt, according to the NCR. About 10 million accounts are more than three months in arrears.
If you have fallen behind on payments, a default is added to your name and will only be removed after two years - even if you repay the full amount.
If you have paid the outstanding debt, ask the credit provider for a written instruction to the relevant credit bureau to make sure that the default information is update.
Make sure to keep a copy of the instruction for your records and make sure that the default is removed after two years. This should be done automatically, but sometimes this doesn't happen.
If your creditor turns to the court, which then orders you to repay money, a judgment will be added to your credit record. Judgments remain on credit records for up to five years. If you are sequestrated, the information will stay on your record for 10 years.
How to keep your record clean
• Pay your accounts on time. Even if you are only a couple of weeks late with payments, it will reflect on your credit history.
• Pay more than the required monthly minimum.
• One area of regular dispute is when goods are returned to a credit provider after an instalment sale or lease agreement. Make sure you understand your rights, that the credit provider refunds you and that you keep all relevant documents.
• As soon as you are struggling to repay your debts, or when you lose your job, contact the creditor and work out a new repayment plan. Keep all documentation on record.
• Make sure that all negative information was deleted after the prescribed minimum periods.
• Take care with doctor's bills. One of the biggest reasons for negative information on credit records is unpaid medical accounts, largely because patients (wrongly) think their medical aid will take care of payments.
• Never buy on credit without making sure you can afford the repayments.
• Try to keep credit repayments between 20% and 30% of your income. If you earn R5 000 per month, keep your credit obligations between R1 000 and R1 500 per month, advised Mapela.
• Never ignore a letter of demand for payment. Make a phone call or write a letter to explain your situation.
• Always comply with summons to court for non-payment. This could have serious repercussions on your credit report.