The latest TransUnion Consumer Credit Index (CCI) slid further into negative territory in the third quarter of 2013 as households continue to struggle with rising living costs. The weak job market also appears to be taking its toll on income security.
According to Tersia van Rooyen, manager responsible for consumer education at TransUnion, having declined to 43.4 from 44.8 in the previous quarter, the index has now been in the red - below 50.0 - for a full year. An index above 50.0 indicates improving credit health; below 50.0 represents deterioration.
The index revealed that more consumers are defaulting on their loans. However, distressed borrowing - borrowing money from one source to pay other debt, or relying on revolving credit such as credit cards for daily living expenses – remains steady.
“Nevertheless, there is evidence that suggests that some segments of the market are increasingly resorting to distressed borrowing behaviour. In particular, the demand for personal loans or unsecured loans is extremely strong while credit card usage remains high,’ Ms van Rooyen said.
“TransUnion has also detected a growing cautiousness among credit providers about granting credit. They appear to be doing this in an attempt to minimise their risk and avoid providing credit to consumers with impaired credit health.
“The good news is that there are steps consumers can take to improve their credit health, but it requires discipline and determination,” Ms van Rooyen added.
Here’s the TransUnion 12-step plan to achieving credit health:
1. Obtain your credit report from TransUnion. You can get your report by logging on to www.mytransunion.co.za or calling 0861 482 482.
2. List all your active loans, credit and other account information from your credit report. Review the report carefully to ensure its accuracy.
3. List all your monthly expenses including the amount you require to service the credit reflected in your credit report. Don’t leave anything out and do not underestimate or write down what you think you could reduce your cellphone bill to – if you try really hard.
4. Next, write down your total monthly income.
5. Subtract your expenditure from your income.
6. Examine your budget honestly and critically so see where you can realistically reduce your expenses and if possible, even save 10 percent of your income each month. Decide what are “must haves” and “nice to haves”. ; Reduce your expenditure on ”nice to haves” such as spending money on entertainment – regularly eating out or going to movies, clubs or pubs; or buying expensive shoes, clothes and cosmetics.
7. Now look for ways to reduce your “must have” monthly expenses. Carpool to save on petrol; conserve water; turn off lights when you leave the room.
8. Apply these savings towards paying off your debts.
9. Consider paying off first any debts with high interest rates; accounts above 35 percent of their credit limit; debts that are close to be being paid off; or those with high annual fees.
10. Create a payment calendar with the due dates of each debt and the payment amounts – and stick to it.
11. Set up credit monitoring and regularly review your credit report. This will not only enable you to monitor your progress and detect additional areas to work on, it will also ensure that you are immediately alerted to any inaccuracies or potential areas of dispute within your report.
12. Finally, set goals and do not forget to celebrate – within your means – when you reach a major debt reduction milestone.
Visit www.mytransunion.co.za for more information.