Credit invisibles huge problem for SA, themselves

Cape Town - Almost one fifth (19.15%) of adults in South Africa are “credit invisible” – placing them at risk of never qualifying for traditional lines of credit.

According to Statistics SA’s 2014 mid-year report, there are 27.3 million people over the age of 20 living in South Africa.  The latest Credit Bureau Monitor (June 2014) published by the National Credit Regulator, put the number of credit-active consumers in South Africa at 22.12 million.

“That means more than 5 million adults in South Africa don’t have a credit history recorded at any of South Africa’s major credit bureaus. These people are effectively credit invisible,” said Tersia van Rooyen, director: e-Commerce at TransUnion, South Africa’s largest credit bureau.

“Without any kind of credit history, consumers are largely precluded from accessing credit and taking advantage of certain opportunities.”

For example, credit invisible individuals may find it more difficult to rent accommodation, purchase a home, buy a car, obtain insurance, get a credit card or a store card, or even obtain a student loan.

“Not having a credit history and therefore a credit report effectively shuts people out of many common financial transactions, including those that may help them build wealth and manage their money,” Van Rooyen explained.

“It effectively mires them in a poverty trap – or forces them to use alternative – and often expensive — financial products that credit reporting bureaus don’t track such as unsecured personal loans, often dubious sources, that invariable carry a hefty interest rate.

“These loans can ensnare people in a cycle of debt that’s almost impossible to break. The problem is that even if people do make timely payments on those loans, it won’t help their credit rating – continuing to keep them locked out of mainstream credit.

"And that is not good for them, or for the country in which chronic poverty is a growing problem,” cautioned Van Rooyen.

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