Debt free - why am I penalised?

2011-09-13 06:59

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 loans.

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.

 - Fin24


  • Limpopoist - 2011-09-13 09:11

    Why should the client be rated on cridet point than saving point.My friend was denied vehicle finance with R40000.00 deposit for R1000000.00 Vehicle. May NCR and national saving association of south africa should meet to remove credit point system and replace it with saving points

      ngoako.mathekga - 2011-09-13 09:28

      You mean R100 000.00?

  • chub - 2011-09-13 10:29

    Same crap happened to me, I couldn't apply for a home loan because I had no credit record even though I pre-qualified for a bond... Apparently we didn't work smart enough.

  • Eishh - 2011-09-13 13:27

    The writer asks: What am I missing? Let me tell you. You are a bad example to their clients. They make money out of those who borrows money, not saving. Face the old furniture a while longer and save to buy cash and show the credit provider store a middle finger.

  • Jim - 2011-09-13 13:51

    My 26 year old daughter has a full time job, a bank card , rents, but no debt anywhere, and because of that she cannot open an account. So for being a cash buyer and having no debt she is penalised. What utter crap!!!

  • tim - 2011-09-13 15:16

    Strange. Usually when one does not have a credit record the company providing you with credit does so using certain credit limits, e.g. R1,000 (that is how Woolworths did it for me). After 6 months (after monitoring your repayment behaviour) they up this figure to say R3000, etc.

  • king stukie - 2011-09-13 15:36

    The money itself represents a debt owed to the private banks that issue the money. Watch Money as Debt. You would think in a sovereign country government and not private banks issue the money. It's also the reason we pay income tax VAT and inflation.

  • Chris - 2011-09-13 16:54

    I had the same thing two years ago, got no car or home loan debts, when I applied for a bond for a investment property at my own bank. They refused with no reason even after I called everybody in the home loan department. The Credit Rating process must change.

  • Chris - 2011-09-13 16:58

    Credit providers will base thier lending decision on elements including risk, affordability and credit history. If they have no history to base a lending decision on and with the risk of reckless lending, they may not. If you go to, they will show you your status and help you build your credit profile and status so you can get credit.

  • Craig Simbarashe Mudzimurema - 2011-11-03 13:36

    All credit providers carry a risk when they lend out money. The risk is around whether the borrower will be able to pay back or not. And the only way to predict this risk is to use historical view of the borrower's credit/payment profile. Without a credit profile, credit providers are unable to know your risk profile and therefore unwilling to lend you money. My suggestion to all who want to borrow for a house, or car in the future is to get an Edgars account, or Vodacom or a credit card and just manage it responsibly. Pay off everything at the end of the month. That's just how the system works

  • skorriemorri - 2011-11-05 15:16

    My advice,or rather opinion is to stay without debt.

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