You can improve your credit record

2017-08-09 06:03

Most people tend to think of blacklisting as something that happens when a person is denied credit due to a poor credit record.

This term is misleading and implies that there is nothing one can do about it.

Marlies Kappers, head of marketing at DirectAxis, elaborated on the reality that credit providers base their decisions on whether to lend you money on information from credit bureaus, which calculate your credit score.

An individual’s score is based on information found in their credit report, their payment history and amounts owed, as well as any defaults and enquiries about their credit worthiness.

“The term suggests that there is a central blacklist. There is no such thing and you cannot be blacklisted,” Kappers said.

“It is regarded as a lazy way of trying to explain why someone was denied credit and is dangerous, because it implies there is nothing you can do about it.”

She said credit providers, such as banks and finance companies, base their decisions on whether to lend a person money on information from credit bureaus.

“These are companies that calculate your credit score based on your behaviour – positive and negative.

“If you pay your accounts on time every month, your credit score will reflect this and credit providers will look on applications more favourably.

“For example, you could receive a better interest rate and terms than someone with a lower credit score.

“In the same way, if you don’t settle your accounts or you skip a month and pay twice as much the next month, this will show on your credit score.”

Suggesting that a low credit score means you have been secretly blacklisted by an organisation is not only wrong, but it ignores two important points: that you have a right to know your credit score and you can do something about it.

“South Africans are entitled to one free credit report each year. You can get this from any of the major credit bureaus. The report will tell you your score and you can also check for any mistakes,” she said.

“If you have a low credit score and there are no mistakes on your account, you can still improve your credit score over time by settling overdue accounts.”

Taking that route will not clear your credit record, but will improve your score.

Reducing what one owes and paying off debt, rather than moving it around, will also positively affect one’s score.

“Remember, your score is based on information found in your credit report. This includes your payment history, amounts owed, activity on an account, the age of your accounts, any judgements or defaults and enquiries about your credit worthiness,” Kappers said.

“Ultimately, it is your behaviour that determines whether a bank or other financial institution will consider you creditworthy. The score is just a reflection of that behaviour – good or bad.”

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