Many South Africans are barely scraping by, because they are paying their monthly debt instalments, out of fear that non or late payments will negatively reflect on their credit report and affect their credit score.
This is especially true if they are planning to purchase a large item such as a car or a house.
Let’s face it, there is no way you are going to qualify for a home loan from a registered lender if you don’t have a good, “clean” credit report.
One which has no judgements, defaults or missed payments listed and carries with it a good credit score.
Credit bureaus in South Africa are regulated by the National Credit Regulator (NCR).
They basically gather information around the credit and spending habits of consumers and companies on behalf of financial institutions (banks, creditors etc).
This assists the finance houses in determining whether they can, or want to, lend money to a person or company.
There are a few factors which play a role in whether someone is considered high-risk or low-risk, and whether they can get the loan.
Different credit bureaus use different credit rating products, but they basically work the same.
Your eligibility for a loan is based on:
Your payment history (35%): This includes a record of payments on all types of loans, the amounts owed and any delinquent accounts.
Credit utilization (30%): This would include how much of your available credit you are utilizing. Eg: you have a R10 000 credit limit, you are considered in good standing if you have a balance of R4000 owing. The higher the amount owing in relation to the approved available credit will impact your chances of getting a new loan.
Length of credit history (15%): This takes into consideration the “age” of your “youngest” and “oldest” account and the average age of all of your accounts.
New credit applications or accounts opened (10%): This would include the number of new accounts that you have opened, as well as the number of requests by creditors/lenders to check your credit reports or scores.
Mix of credit (10%): Here, the different types of loans you have, including secured debt (homeloans) and unsecured debt (credit cards, retail store cards, personal loans etc) get taken into account.
Now on paper, in research and in reports, all of this might look standard and hunky-dory.
But personally, I have one helluva problem with this “risk-calculating” and “credit worthiness” approach to things.
What this system doesn’t take into account, especially with regard to home loans, is that many South Africans who cannot access residential bonds (because of lack of affordability on paper, bad credit report, low credit score) have actually been paying rent to landlords, far higher than many bond repayments, and for years!
People who pay R8000 rental per month (without fail, to a landlord) can’t seem to access a bond on which the monthly repayment would be R5000.
Yet, the landlord who doesn’t live in his house and uses his tenant’s rent to service his bond (which is the clever thing to do) will build up the required credit record to gain access to more credit and amass more property.
So the poor remain poor – and the rich get richer.
Now, since these credit bureaus wield so much damn power over our lives, and have so much of our (private) information at their fingertips, I don’t think it is unreasonable to expect them to keep our information safe, especially in this day and age of identity and credit fraud.
But apparently that is too much to ask!
In 2020, credit bureau Experian had a breach of data that exposed the personal information of nearly 24 million South Africans and 800 000 businesses.
Recently, TransUnion South Africa was hacked and held to ransom.
This breach meant that the personal details of around 54 million South Africans were unlawfully accessed.
In an email to people whose data has been compromised, TransUnion stated (amongst other things) that: “The TransUnion South Africa team is working closely with external experts to understand what data was affected.
“Based on our investigation to date, fields of information that might be affected include name, ID number, date of birth, gender, telephone number, email address, address, marital status and information, identity of employer and duration of employment, vehicle finance contract number, and VIN (vehicle identification number) numbers.”
They also said that in isolated circumstances, spouse information, passport numbers, credit or insurance scores may be impacted.
Each consumer may have a combination of different fields impacted, depending on what data was available.
With or without these security breaches at the credit bureaus, I strongly suggest that you get your free yearly credit report from all credit bureaus (every consumer is entitled to one free report from every credit bureau every year) and check for any activity that looks suspicious.
Check if there has been a sharp rise in your balances owing, and see if there are “new” accounts on your name which you didn’t open.
Sadly, it seems we are on our own and at the mercy of credit bureaus and those who breach their obviously inept security systems.
dailyvoice@inl.co.za