Dealing with a poor credit record

If you haven’t kept up to date with your credit bureau reports, you may be in for a surprise when you apply for home loan finance.

According to Adrian Goslett, regional director and CEO of RE/MAX of Southern Africa, a large number of potential buyers are referred by their estate agents to attorneys, if they have a black mark against their name that is preventing them from obtaining a bond.

“Anyone who has ever applied for credit will be listed with the various credit bureaus, and any credit provider that subscribes to a credit bureau will have access to their credit history. Most companies and financial institutions assess their risk based on the information provided by the credit bureaus. If there is any negative information on your credit history, it is highly unlikely that you will be approved to receive finance. This emphasises the importance of checking your credit reports annually.

“In some instances, you may already have been home shopping and found the home you want to buy, only to be turned away from the bank because of a blacklisting against your name. It is possible to rectify the situation and clear your name so that you don’t lose the property to another buyer.

“Removing a blacklisting can be an arduous, drawn-out process which differs from one case to the next depending on the circumstances. How long the process will take to rectify will depend on the parties involved, the type of blacklisting and possibly the courts, in the case of a judgment against you.”

Goslett says a default is a listing of a party who has failed to pay a creditor an outstanding amount. A default or adverse listing will remain on your credit record for two years. If the debt has been settled, a request can be made by the creditor to the bureaus to amend the listing to reflect that the outstanding debt has been paid in full.

“As a golden rule, when settling an outstanding debt with a creditor that has listed a default against you, obtain in writing that the creditor will amend or remove the listing. It is also advisable to seek legal advice from a specialist consumer law practitioner who can provide guidance and a clearance service,” says Goslett.

A judgment is more complex than a default listing, as it is a court order compelling the defaulting party to pay a debt. A magistrates court will deal with matters up to R100 000, whereas any debt that exceeds R100 000 will fall under the jurisdiction of the high court.

If the debt is not settled, it will remain on the credit profile for five years before it is automatically removed. In order for the judgment to be removed from a credit profile before the five year period has lapsed, the New Credit Regulations provide that the debt must first be settled. Once settled, an attorney can then apply to have the judgment rescinded. The creditor will need to provide consent before this can take place.

He provides the following tips to avoid poor credit records:

  • Read all clauses before signing a contract with a creditor.
  • Make regular payments to creditors by the due date.
  • Keep a list of all creditors, the basis of credit and amounts to be paid.
  • Keep a record of all payments made to creditors.
  • If you move, notify all creditors of your change of address.
  • Attend to all correspondence from creditors or their legal representatives.
  • If you are unable to pay your creditors, make a written arrangement to restructure the payments where possible.

“Keeping a clean credit record is less costly and time-consuming than dealing with adverse credit information,” Goslett says.