“Build up a credit profile when you are young”. “No, don’t access too much credit too soon.” “It’s expensive to check your credit score and you shouldn’t do it too often.” “A judgment against you means you must place all your assets under your wife’s name”. There is so much information floating about when it comes to your credit profile and sometimes well-intended advice from friends and family can easily go awry.
Chris van Rensburg, CEO of Kudough says once you add in the wealth of misinformation available online, it is all too easy for consumers to buy into myths and false beliefs about their credit profile. “Contrary to popular opinion, your credit profile is about more than simply scoring your loan application by a bank. It can affect everything from a potential job opportunity to the interest rate you are afforded on a loan,” he says.
Myth 1: It’s expensive to check your credit score and every time you request a report, it reflects badly on your credit rating.
Fact: The National Credit Act stipulates that you have the right to request a free report each year. What is more, as a Kudough subscriber, you can check your report monthly or quarterly from up to 4 different leading bureaus without it making a nega- tive mark
Action you can take: Checking your credit report is quick and easy.
Myth 2: A negative or poor credit profile means you will never be able to access credit again and can never be removed from your record.
Fact: The National Credit Act (NCA) places limits on how long certain information can remain on your credit profile.
Action you can take: Use your right to check your credit profile to make sure that information is being updated. This includes making sure that the time limits imposed by the NCA are being correctly observed by the credit rating agencies. For example, the time limit for adverse classifications of your payment behaviour such as “delinquent”, “defaulted, “slow paying”, “absconded” or “not contactable” is one year. The time limit for a court judgment against you is five years. It is also important to note that adverse information might be listed by a different bureau than the one you are checking on, and the bureaus do not share information.
Myth 3: All credit is bad and the best way to have a good credit rating is to have no credit at all.
Fact: Managing your credit accounts responsibly is what helps you achieve a good credit rating. Having different types of credit such as a home loans, vehicle finance and a credit card tells lenders that you are able to responsibly manage a diverse cred- it portfolio and payment obligations. Having no credit just means you don’t have a credit rating.
Action you can take: When you take out any credit agreement, make sure you read the fine print carefully and fully understand what you are getting into. For example, one of the best ways to use a credit card is to make sure that you pay off the full balance within 55 days so that you avoid paying any interest. Use credit facilities responsibly and only take out as much credit as you can afford to repay.
Myth 4: If you have a problem repaying debt, letting the bank know will result in a bad credit profile.
Fact: Defaulting on payments or skipping payments because you are juggling different debts will reflect poorly on your credit profile.
Action you can take: Contact your credit provider as soon as you know that you have a problem. The creditor wants to find a way to help you repay the money you owe them and often will be willing to negotiate a revised payment plan based on your affordability.
Myth 5: Any potential employer can request your credit profile and refuse to give you the job if you have a bad credit profile.
Fact: The National Credit Act makes it compulsory for any potential employer to get your permission before requesting a credit check on you. In addition, it is only al- lowed in circumstances where the potential job will require you to deal with cash or finances.
Action you can take: If you do have a negative credit rating, there are steps you can take to improve your credit score and change your rating to a positive one. Van Rensburg says Kudough has a team of credit coaches that will walk you through the process and help you build your status.
“The reality is that your credit rating or profile is something that has a significant impact on your lifestyle. Getting to grips with it and learning to manage your credit profile is simply the smart thing to do,” he concludes.