Illustration: Colin Daniel

You are entitled to one free credit report once a year from each of the registered credit bureaus. This is one of your rights in terms of the National Credit Act (NCA).

In the first quarter of this year, credit bureaus issued just over 120 000 credit reports to consumers, according to the most recent data available from the National Credit Regulator (NCR). The regulator publishes a quarterly report called the Credit Bureau Monitor.

According to the March 2012 issue of the Credit Bureau Monitor, of the 120 000 credit reports issued to consumers at their request in the first quarter of this year, 84 percent were issued without charge and consumers paid for the remaining 16 percent. In other words, 16 percent of consumers who asked for a credit report had already received a free report from the same bureau over the past 12 months. In the previous quarter, credit bureaus issued 103 400 credit reports to consumers.

Sharon Coppola, spokesperson for the Credit Bureau Association (CBA), says the NCR’s figures show that consumers are increasingly exercising their right to view their annual credit report for free, but the CBA would like to see more consumers doing so.

South African credit bureaus have records on 19.5 million credit-active consumers. The number of consumers with impaired records increased to 46 percent – or a staggering nine million consumers – in the first quarter of 2012.

Breaking down the 46 percent, almost 20 percent of consumers are three months or more in arrears; 12 percent have an adverse listing at a credit bureau; and 14 percent of consumers have judgments or administration orders against them.

An adverse listing is a negative remark on your report, and usually concerns legal action taken to collect a debt from you.

Your credit report is like your financial CV, so it is in your best interests to make sure that it is an accurate reflection of your financial history, Coppola says.

“We recently had a consumer who was about to apply for a home loan. Before he made any applications, he scrutinised his report and made sure that before he went out there, he knew his report was clean. And kudos to him.”

There are 11 credit bureaus that are registered by the NCR, but only five are full members of the CBA, Coppola says. They are Compuscan, Consumer Profile Bureau, Experian, TransUnion and XDS. If you want to obtain a good overview of your credit profile, Coppola says going to these five will suffice.

“All [of these bureaus] offer a full service in that they file data (information from credit providers and the courts), give access to subscribers (credit providers) and issue reports to consumers.

“We’re urging consumers to manage their credit report: in other words, get your report, check the entries and, if something is not right, log a dispute. Let the credit bureau investigate on your behalf,” Coppola says.

In the first quarter of this year, consumers lodged 10 357 disputes relating to credit reports with credit bureaus, the NCR reports. Most disputes – 7 722 – were resolved in favour of consumers.

The NCA gives consumers the right to challenge information held by a credit bureau.

If a credit provider cannot prove the accuracy of the information that is disputed by a consumer, the credit bureau is compelled to remove the information from its records within 20 business days.

If it fails to do so, or if you not satisfied with how the credit bureau resolves the dispute, you can complain to the Credit Ombud by telephoning 0860 662 837 or emailing [email protected]

Coppola says checking your credit report regularly also mitigates the risk of identity theft. A fraudster “steals your identity” by fraudulently using your identity number to apply for credit in your name. The fraudster has the funds paid into his bank account, and often gives the credit provider a false address so that you are none the wiser that a loan has been issued in your name. Typically, you only find out about the loan some time later when the credit provider’s tracing agents track you down and demand payment.

* For the contact details of all the registered credit bureaus, call the National Credit Regulator on 0860 627 627, email [email protected] or go to www.ncr.org.za and click on the “Search for credit bureau” link. After the search page opens, click on the “Registered” button.

WHAT DOES YOUR REPORT SHOW YOU?

The credit reports supplied by Compuscan, Experian, TransUnion and XDS all provide you with the same kind of information.

Geoff Miller, chief executive officer of TransUnion, says the information “will be similar, because we have similar sources of data”. These sources include creditors, lenders and public records held by the courts.

The only information that is shared among credit bureaus in South Africa is that which a bureau removes from a credit report, because, as a result of a consumer disputing the information, it is found to be incorrect, Miller says. “By law (the National Credit Act), we are obliged to share that information with our competitors.”

Credit bureaus differ in how they present and interpret your data, and each bureau has its own method of scoring you (see “What’s the score?”, below). Only XDS provides you with your score, and only TransUnion provides you with a detailed explanation of the information contained in each section of the report.

The information on your report will be divided into the following sections:

* Your personal details. This information is compiled from the applications you have made for credit. Your credit report will list your full name, identity number, marital status, physical address, telephone numbers, employer and occupation. Some reports have a history of your addresses, telephone numbers and employers.

* Accounts. Your report will provide a summary of your accounts, including the dates on which the accounts were opened, the credit limits or the amount of each loan, the payment terms and the outstanding balances on each account.

Reports from Experian, TransUnion and XDS provide a 24-month summary of how you have managed your accounts. So if you were late in paying an account, the report will show the date on which you were late and the number of days during which the account remained in arrears.

If a service or credit provider has taken legal action against you for late or non-payment and has handed over your account to a debt collection agency, this information will remain on your credit report for two years. If, because of your payment behaviour, a credit provider has classified you as “delinquent”, “defaulted”, “slow-paying”, “absconded” or “not traceable”, this classification will stay on your record for one year.

Certain accounts, such as municipal accounts, are not included on your credit report. Sharon Coppola, spokesperson for the Credit Bureau Association, says bureaus generally do not collect data from municipalities because of the difficulty in ensuring the accuracy of the data.

* Public domain records. If a judgment has been granted against you, this will be recorded on your report for five years. If a credit or service provider has taken legal action against you in the form of an administration order, this will be reflected on your report for 10 years. A sequestration order will show on your report for 10 years or until a rehabilitation order is granted. And a rehabilitation order will show on your report for five years. If you have been liquidated, there is no limit to how long this fact will remain on record. If you are in debt counselling, this will be recorded on your report until your debt counsellor issues you with a clearance certificate.

You will not find judgments relating to an unpaid traffic fine or television licence on your credit report, because these orders have not arisen as a result of a credit agreement, Coppola says.

* Company directorships. If you are a director of a company, this may be recorded on your report.

* Inquiries. An inquiry is recorded on your report whenever your report is shown to another party, such as a service or credit provider. An inquiry is typically done when you apply for credit. Records of inquiries will remain on your report for up to two years.

If you have not authorised a company to make an inquiry on your report, or if you do not recognise any of the companies that have done so, this may be an indication of attempted fraud or identity theft.

* Trace alerts. A trace alert is placed on your credit report when a service or credit provider has asked to be notified when any updated contact information is loaded on to your report. They do this when they are unable to contact you, because your contact information is out of date.

WHAT’S THE SCORE?

Credit bureaus use the information on your credit report to work out a score that rates how you manage credit and hence your creditworthiness.

In terms of the National Credit Act (NCA), you are entitled to a free credit report but not to a free credit score.

Of the big four bureaus, only XDS provides you with your score on your report. Although you will not find your score on your Compuscan report, you can obtain it free of charge on request. If you want your score from Experian, it will cost you R22.80. TransUnion does not provide consumers with a score, but TransUnion’s chief executive officer, Geoff Miller, says that in the fourth quarter of this year the company plans to launch a score that will be available to consumers.

All credit bureaus evaluate data differently and there is no standard scoring model. But all scoring models look at the following information:

* Payment history – your account payment information, including any adverse payment behaviour;

* Amounts owed – the sum total of your current exposure to debt;

* Length of credit history – how long your accounts have been open and the time since they were last active;

* Types of credit used – the mix of accounts you have, such as a home loan, vehicle finance, credit cards and store cards; and

* New credit – the number of recently opened accounts and the number of recent credit inquiries.

Miller says although your report will be “tagged” every time you apply for new credit, this in itself will not adversely affect your score.

Sharon Coppola, spokesperson for the Credit Bureau Association, says making numerous inquiries will not fundamentally affect your score. Account information, information from debt collection agencies, judgments and administration orders have a far greater impact on your score.

But what are the consequences for your score when you shop around for a home loan or vehicle finance?

“In terms of the NCA, credit providers are obliged to do affordability checks to satisfy themselves that a consumer can meet affordability requirements. One check is with a central repository [credit bureau]. Where a person is shopping to assess their best position, it will show, but it’s not going to impact them enormously,” Coppola says.

Miller says that, in most instances, credit grantors will “dedupe” (meaning, remove duplicate entries from a list or database) such inquiries so that they will be viewed as a single inquiry.

“It’s definitely fair to say shopping for a home loan or vehicle finance won’t harm your record. However, excessive inquiries in rapid succession reveal that a consumer is credit-hungry and may be risky,” he says.

Credit Ombud Manie van Schalkwyk says that making numerous inquires may lower your score but it will not cause you to be turned down for credit. The tagging of inquiries is a requirement in terms of the NCA and is there to alert consumers to possible fraud. “If it affects you so badly that you feel you can’t get credit because of that, you need to dispute it,” Van Schalkwyk says.

Coppola says it is important to remember that your credit report and your score are just two of the factors among many that a credit provider will take into account when assessing your eligibility for credit. Other factors include your income and expenses, and a credit provider’s underwriting policies, she says.

Most credit providers use customised credit scores, along with bureau scores, for their lending decisions, Robyn Moolman, scoring analyst at Compuscan, says.

A consumer who obtained credit reports from two bureaus was given a score of 868 (out of 999) by one bureau and a score of 657 (out of 999) by another, in spite of there being no difference in the information held.

Moolman says the score range and scaling will differ between bureaus, therefore scores are not comparable across bureaus. It is important that you manage your credit well if you want to ensure you will have a good score.

ONE, TWO, THREE: YOUR CREDIT REPORT FOR FREE

So, how easy is it to obtain your free credit report? Personal Finance staff members applied for a free annual credit record from the “big four” credit bureaus: Compuscan, Experian, TransUnion and XDS.

Compuscan (www.compuscan.co.za), Experian (www.creditexpert.co.za) and TransUnion (www.mytransunion.com) all enable you to apply for your report online. And if you aren’t prompted to upload, email or fax a copy of your identity document (ID) and proof of address to the credit bureau, you can expect to receive your report within minutes of applying.

The online application process typically involves at least three steps. First, you provide your personal information, including your identity number. This is followed by a identification verification process, which may or may not involve your having to upload, email or fax your ID and proof of address to the bureau. Finally, you verify an existing account. Then your report is emailed to you.

When applying to Compuscan, you will be required to send the bureau a copy of your ID and proof of residence.

Annelene Dippenaar, legal adviser at Compuscan, says credit bureaus have a legal obligation under the National Credit Act to verify your identity every time that you want to access your credit profile. “This is for your own protection, and Compuscan complies with this requirement to the fullest extent.

“If a credit bureau fails to properly verify your identity, anyone with access to your ID number can pull your credit report and gain access to confidential account information, which may open you to being a victim of fraud and identity theft,” Dippenaar says.

Consumers who do not have access to the internet can contact Compuscan’s call centre (0861 51 41 31), where consultants can help you in one of 10 languages, Dippenaar says.

To obtain your free credit report from XDS, you have two options, Hayden Marimuthu, general manager: audit and administration at XDS, says. “You can contact the XDS Call Centre (0860 93 70 00) and, once your identity has been validated, you can have your credit report faxed or emailed to you.

“Alternatively, you can access an abridged version of your report through the XDS mobisite (www.credit4life.mobi) on any mobile device that can access the internet. Following registration and identity validation, you can view all the critical demographic and financial information on your report. On request via the mobisite, your full report will then be faxed or emailed to you,” Marimuthu says.

Adrian Goslett, chief executive officer of estate agents network RE/MAX, says consumers should take advantage of their right to one free credit report a year from each bureau. Goslett points out that, since there are four big credit bureaus, if you were to go to one bureau every quarter, you would be able to check your credit record for free all year round.

If this sounds too much like hard work, for R89 Credit Health will provide you with one report that combines the information held by three of the big four credit bureaus.

“Everyone gets different info and gives you different info. Credit Health collates the information held by TransUnion, Experian and XDS to give you a holistic picture in an easy-to-read format,” Michael Herbstein, marketing manager of Credit Health, says. You can order a report from Credit Health online, and you can pay with your credit card or do an electronic funds transfer. After you have sent proof of payment to Credit Health, you can expect your report within the hour.

Herbstein says the major benefits of the report are not only that it saves you time and provides you with all the information you need in one report, but also that it provides you with a score that gives you some indication of your overall creditworthiness.

And for consumers with adverse information on their record, the report comes with an “action plan”, which tells you how to clean up your record, Herbstein says.