DebtBusters CEO, Ian Wason, provides YOU Magazine with expert advice on the consumer debt trap. Debt is a fact of life for many South Africans but are you paying much more than you have to? Here’s advice on the best way to borrow. – By Richard Van Rensburg You’re already deep in debt when your […]
10 December 2015
Nothing can beat that feeling of excitement when your debt counselling process is nearing the end. You are eagerly anticipating receiving your clearance certificate, the proof that you are finally free of your debt!
This is new territory for you, so take some time to understand what happens after you receive your clearance certificate…
What is a clearance certificate?
A clearance certificate is a letter, issued by your debt counsellor, which states that you have settled all your debt as per your debt restructure plan.
As per the National Credit Act, you are eligible to receive a clearance certificate when:
- all your unsecured debt is paid up
- and, if applicable, your bond/mortgage or long-term agreement payments are up to date
- and, all your debt counselling fees are paid up.
Who issues the Clearance Certificate?
Your Clearance Certificate will be issued by your Debt Counsellor to all your credit providers and credit bureaus.
What happens to my credit record when my Clearance Certificate is issued to the credit Bureau?
Once the bureaus receive your Clearance Certificate, they will remove the debt counselling flag off your profile. In addition to this they will remove all your default listings and judgements. The only record that will remain is your payment history. According to the Credit Act, your payment history will remain on your record for two years.
How long must I wait before I can get new credit?
Many people think they can get credit straight away after receiving their clearance certificate. This is not always possible. You need to give your credit providers time to notify the credit bureaus that your debt is fully paid. Then, you need to allow more time for the credit bureaus to update their records. This could take up to three months.
Also bear in mind that your credit score won’t be the best soon after Debt Counselling. This is because under debt counselling you were paying less towards your debts each month than what you originally agreed to pay when you first took out your debt. Be patient, in a few months the credit bureaux should adjust your credit score upward.
Monitor your credit report
Just because you have paid all your debts, does not mean you never have to look at your credit report again. We suggest that you pull a credit report every month for at least the first six months after you receive your Clearance Certificate. This way you can check that all your defaults are cleared. If there are any discrepancies, take it up with the credit bureau. You can also use your credit report to monitor your credit score to see how it improves. Make sure your credit profile and credit score is good before applying for new credit. Every time you apply for credit and get declined, it negatively affects your credit score. In the end, the credit provider decides whether or not they want to grant you credit. However, if they do decline your credit application, you have a right to know why.