Credit reports, credit scores and debt counselling
Do you want to get your finances in order this year? Many people do, but don’t know where to start.
Start your year right and check your credit report
Checking your credit score is always a great place to start. It helps you to understand your financial position, how banks and creditors will view you, and it can give you insight on where you need to improve.
But in order for it to be as helpful as it sounds, you need to understand what it is and how it works. You’ll find all that out in this article.
What is the difference between a credit report and a credit score?
Your credit score is simply the number that reflects your credit risk as a consumer. In other words, it shows how likely you are to pay back credit. It is calculated using various algorithms and scoring models that consider factors - not limited to - your payment history, your outstanding debt, and how long you have had credit.
Every credit score checking tool will have a different scale. DebtBusters uses a scale of 0 - 100. ClearScore uses three-digit numbers.
On the other hand, your credit report is more complicated. It is essentially a full documentation of your credit history. It will include information such as:
- Your full credit history
- A list of the types of credit accounts you’ve had
- Your payment history
- Current credit limits and account balances
- Whether you are (or have been) under debt review
- Whether you’ve been declared bankrupt
Checking your credit score is usually free and has no effect on your score. Getting your full report (especially if you do it often) can affect your score.
What impact does your credit score really have?
Your credit score is a key factor in your financial life. It gives you a way to understand your financial status and helps you plan your upcoming financial moves. Making time to look over your credit profile and risks will help with money-related decision making.
Can you imagine finally saving up enough money to put down a deposit on your dream home, but your bond application gets rejected because your credit score is not up to scratch. Sounds like a nightmare, right? This happens often and it is one of the effects of a bad credit score.
A bad credit score will mean that banks and lenders consider you risky and either will not give you any loans, or will give you very high interest rates.
In some cases, employers check your credit score before they hire you, so it could also affect your ability to get hired.
In addition, a bad score makes it difficult for you to find housing, and even get certain services.
What is a good credit score?
When you check your score on DebtBusters, you will be given a number. Below is a table showing what your score means. This will help you to get an understanding of your financial position.
The higher the number of your score - the better your score is! If you’re high risk, it means your score is bad and you’ll have a tough time getting loans and credit.
Why should I check my credit report?
Your credit report will show you a complete record of your financial history, giving you insight into your borrowing and spending habits, your payment trends, as well as your personal details.
You will be able to see every account you have ever opened, every payment you have skipped, every judgement you have received and the amount you still owe your creditors.
From there, you will be able to plan your finances better - with a deep understanding of your financial self. Your financial decisions will be made using evidence and facts, rather than feelings. You can also change your spending habits based on the information, should that be necessary.
Checking your report will also allow you to detect instances of fraud, monitor your financial progress, and give you the power to budget better.
How often should a credit score be checked?
It is important to review your credit report at least once a year.
This keeps you informed about your credit status and allows you to evaluate where and how you need to improve. In addition, it gives you the opportunity to ensure all your personal account details are correct, and that you have not fallen victim to identity theft.
Pulling your credit report consistently may prove detrimental, as it affects your score negatively. This is because bureaus note every time you pull a full report - and pulling full reports consistently is considered worrying behaviour. On top of that, you only get one free credit report a year. If you pull more you’ll need to pay for them.
Your credit score on the other hand can and should be checked every month. It changes constantly (the bureaus update it monthly) and is always free to check so there is no reason not to.
How do I get my credit report?
Transunion states that fewer than 5% of South African consumers make use of the legislation, entitling them to obtain a free credit report from any credit bureau once a year.
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Find out moreYou can quite easily access your credit report by visiting any of the South African Credit Bureau’s websites and following the prompts on the websites.
For example:
Other good credit monitoring services you can use
If you’d prefer not to get your report through a credit bureau, you can also use a different credit monitoring service.
Here are some options:
Each of these services will provide you with different information.
For example, Kudough provides you with an in-depth credit check and the knowledge to understand the ins and outs of your credit report, as well as tips and advice.
DebtBusters has a platform on which you can see your credit score, your open accounts and balances, how you compare to other people in your age range, and the percentage of your income going to credit accounts. From that platform you can then opt to pull a full credit report.
Debt counselling and credit scores
When it comes to credit, debt, and debt counselling, there are a few questions DebtBusters often gets asked. Here are some answers for you:
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Do I need Debt Counselling?
If you are using credit to pay for household expenses, you’re being hounded by credit providers, and you’re struggling to make your payments - you likely need debt counselling.
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How do I consolidate my credit card debt?
You will need a debt counsellor - like DebtBusters - to help you to consolidate your credit card debt. When you contact the debt counsellor, they will secure lower interest rates for you, and allow you to pay all your debts in one fixed, decreased payment.
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What do I do if I am a victim of fraud and my credit record has been breached?
The best process going forward would be to lodge a dispute at the credit bureau on this specific account, which will be reflected on your credit report.
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What is a credit bureau?
A credit bureau collects and stores data supplied by credit providers. Credit bureaus fulfil the duty of gathering data and compiling reports on individual consumers and allocate them a credit score.
To get fuller answers to any of the above questions, or find the answers to any other questions you may have, visit our FAQ page.
Will debt counselling negatively affect your credit score?
While you are under debt counselling, the credit bureaus can’t list any further negative information under your credit profile because you will be under the protection of the National Credit Act.
Your debt counsellor will notify the credit bureaus that you have applied for debt counselling and your profile will be identified.
Credit providers will no longer be able to take legal action against you.
In summary, your score cannot be negatively affected by going under debt counselling. In fact, in the long run it will help you to improve your score by ensuring that all your debts are paid off.
Will my credit score change when I have finished the debt counselling process?
It is important to understand that before joining Debt Counselling, your credit score was already impaired. Debt Counselling helps you to get back on track so that you can revive your score after paying back all your debts.
This means that once you have completed the Debt Counselling process, your credit score will remain impaired but is now in the position to be fixed.
Once your name is clear, you can start to build with better financial habits so that your score improves.
Start your journey to financial health and review your credit report
Keep yourself informed about your current financial status and protect yourself by ensuring that your information is reflected correctly on your credit report.
Make a plan to build and maintain a good credit history in order to achieve the long-term financial goals you are working hard to achieve.
Please contact us immediately on 0861 66 33 28 if you are experiencing or likely to be experiencing any problems in the future with regard to credit and debt repayments so that we may assist.
