Your Debt Review Status on Your Credit Report
Your Debt Review Status on Your Credit Report
When a company is considering giving someone credit they will draw a credit bureau report. This is a report which tells them all about the credit history of the consumer. The report will list basic information such as where the consumer has lived recently and what other credit accounts they have. What is also shown is how the consumer has paid those accounts. If the consumer has missed lots of payments this will reflect. Armed with this information the creditor can then consider if they feel if the consumer is likely to pay them back for credit they might grant them. They might also be able to decide what interest rate to charge the consumer based on how risky they look.
Granting credit is tricky because if a company offers credit to someone who is actually unable to repay that credit, at the agreed figure each month, this is called ‘reckless credit’. Companies who grant reckless credit can be fined and even lose out on getting their money back. If a consumer applies for credit and the creditor works out they can’t actually afford the credit each month then it does not matter what their credit report says, the consumer should not get credit.
This is true even if your credit score is high. If you can’t pay for credit then you won’t get credit.
When a consumer is experiencing debt repayment challenges and they can’t manage to pay everyone what they owe them each month then they can apply for debt review. They will fill in an application form and meet with a Debt Counsellor to discuss their situation. When they do this, the Debt Counsellor will go onto the internet to a website that the National Credit Regulator runs and capture the consumers details as applying for a debt review. The NCR’s system will then send an email to all 13 credit bureaus across the country and inform them that the consumer is talking to a Debt Counsellor. The credit bureaus will then add this information to the consumers credit report. Should the consumer then head off to a credit provider looking for another loan the credit provider will not only do the maths and see that the consumer can’t afford a loan but also see that they are talking to a Debt Counsellor to get help. Since the consumer can’t afford the loan repayments each month they will not get new credit. Besides they no longer need new credit since they are making a repayment plan, through debt review, for their existing payments. The Debt Counsellor will also make sure they have enough funds to afford their monthly necessities and don’t need to borrow funds for these.
As the consumer goes through the debt review process, the Debt Counsellor will update the NCR’s website to show what is happening with their debt review. Eventually when the consumer has repaid all their debts (or all except for their bond, maybe) then the Debt Counsellor will change the listing on the NCR’s website and this will update all the various credit bureaus that the consumer is no longer under debt review. This means that the debt review status disappears. This is because the National Credit Act says consumers can’t be penalised for exercising their rights under the Act (such as going into debt review). At the same time, the Debt Counsellor will provide the consumer with a document called a ‘clearance certificate’ which shows they are no longer under debt review and their debts are settled.
Some consumers are concerned that the listing is detrimental to their applications for work or rental accommodation. Thus changes were made to the law which made it difficult for companies to just draw a credit report when you apply for work that doesn’t involve you handling money. Jeannine Naude Viljoen, MD of the Credit Bureau Association says that a letting agent “is entitled to check your credit report when you apply to rent a property, but they must have your consent first. The application form will include a separate authorisation form for this…sometimes it will appear in the fine print on the application, so make sure you read carefully before you sign“. You do not have to consent but sadly it might hurt your chances if you don’t. So, it seems this legislation has had little real world impact in this regard. Fortunately, many letting agents now understand debt review better. It can be a challenge though when many people apply for the same property. One of the Debtfree team recently had the experience of being one of over 110 people applying for a single flat in the city. Competition is fierce.
Human Error and Computer Glitches
It is important for consumers who finish up debt review to draw a credit report not too long after leaving debt review. This will enable them to see if the debt review status has actually been removed or not. There have been some complaints in the past that after leaving debt review a consumer who goes to apply fro credit might run into a snag when the creditor draws a report and it still shows that the person is under debt review. This could happen for a number of reasons. The Debt Counsellor may not have updated the NCR’s website; the NCR’s Website might have been having problems; the credit bureau might not have updated the status. It might be a computer that messed up or a human. Either way the consumer will need to sort it out.
If more than one credit bureau shows the old status on their report then it is probably a problem you would need to talk to the former Debt Counsellor about. They will need to check with the NCR’s Website and maybe even follow up with the NCR themselves. The NCR will then update all the bureaus again.
If only one credit bureau is showing the old status then the consumer doesn’t need to worry about speaking to their old Debt Counsellor they can complete that credit bureaus’ complaint form (normally available on their website) and send them a copy of their clearance certificate. This should normally resolve the issue within a month.
Gone Once it is Done
A debt review status on a credit bureau report is a help to credit providers and is not considered a adverse listing such as was discussed during the, so called, pre election “credit amnesty“. The listing stays in place throughout the debt review since the consumer cannot afford new credit anyway. They need to focus on settling their existing credit. After the debt review is finished the consumer will be free to resume using credit, as long as they can afford it.