Understanding your credit report: The 8 most-asked questions
If you’re not reading your free credit report, you could be putting your financial health at risk. But you’re not alone: according to the Credit Bureau Association, only 188 000 South Africans access their credit report every year - out of a total of 25 million credit-active consumers.
Regularly reviewing your credit report should be at the top of the list of your personal financial habits. It can tell you the state of your financial background, your personal payment history, and your creditworthiness. It even flags identity theft and consumer fraud. But to benefit from reviewing a credit report, you have to not only read and understand it, but know how to use the information it contains to your advantage.
What is a credit report?
A credit report is a record of your credit history and payment behaviour that is maintained by credit bureaus, such as TransUnion. It reflects a 24-month view on your account history and payment behaviour. It contains both positive and negative information about how you manage your credit. Your report details:
Personal information: Your name, ID, address, marital status, employment information and contact details.
Account information: A list of every bank and business that’s lent you money; your credit limits, loan amounts and how you are managing them in terms of payment.
Current financial information: Your level of debt, and how many times you’ve applied for credit recently.
Enquiries: Who has viewed your credit profile and for what purpose.
Negative information: Accounts where you have made late payment or no payment at all, court judgment and notices to name a few.
How does it get created?
Every month, lenders send information on your credit and loan history, and your payment record, to credit reporting companies like TransUnion. This information is then analysed to create your credit report.
What’s the difference between a credit report and a credit score?
Excellent question. Your credit score is formulated from the information contained in your credit report.
A credit report is a document that contains information about your financial history, and payment behaviour which could be both good and bad.
A credit score is a three-digit number provides a snapshot, is one of the factors that helps lenders evaluate how safe or risky you are as a customer. Remember, each lender will have their own criteria on how to assess your risk for your credit application.
Why is it important to have a good credit score?
Having a high credit score might help you to get a lower interest rate on credit products such as a house or vehicle loan. A credit report with negative listings such as defaults and judgments; as well as too many enquiries for loans or credit over a short period of time could result in a low credit score, which means you may pay a higher interest rate, or even be denied credit.
What affects my credit score?
The biggest influence on your credit score is your account payment history – that is, how you manage your accounts and whether you pay your accounts on time. Focus on paying the full instalment of every bill on time, so you’re offsetting past negatives with more recent positives. It also helps to maintain a healthy mix of credit - store accounts, credit cards, home loan, and service contracts such as cell phone accounts - to establish a good credit history.
Who views my credit report, and why?
When you apply for credit – like a home loan, a car loan, a new credit card, a clothing store account or a new cellphone contract – banks and lenders will access your credit report as one of the factors to assess if you’re suitable for credit. Other companies that may view your profile include insurance companies, landlords and even employers. But they need to get your permission first.
How do I access my credit report?
Good news: your credit reports are easy to obtain. You can download your Credit Report once every 12 months for free from TransUnion and other credit bureaus in the country.
Who do I speak to if I want to dispute items listed on my credit report?
Often, consumers have errors on their credit reports that affect their credit scores. Request your report and check for mistakes, such as payments marked late when you paid on time or negative information that’s out of date. If you see errors or discrepancies, you can contact either TransUnion on 0861 482 482 or the credit bureau you got your credit report from to lodge a dispute. Provide as much supporting documentation as possible, like receipts or evidence of payment. TransUnion will investigate and respond within the legislated 20 working day period.