There are various credit bureaus and you should check whether you have any listings, with all of them. If you are married in community of property, both spouses must check their listings.

If you find that you do have a default listing and you have not paid the debt up in full, you should contact the company that has listed you and ensure that, before you pay the outstanding amount, you obtain a letter from the company assuring you that the listing will be removed within 24 hours of the debt being paid in full.

If the listing is a judgment, you must ensure to obtain the company’s written guarantee that they will consent to a rescission of judgment.

If you suddenly find yourself in a difficult financial situation you should make arrangements with your creditors and honour these arrangements. Also make sure that all your correspondence, in respect of these arrangements, is in writing.

Bigger companies like Edgars, Foschini, Woolworths and all the banks are members of the Consumer Credit Association and they send all their payment records to the credit bureaus every month. So if you miss even one payment, it shows on your record.

That’s not too serious, however, until you have missed paying for a few months or more. Then it starts to hurt your record.

1. So the number one credit record polisher you can apply is regular monthly payments, made on time. If you miss a month, make sure you pay the next month. (You’ll start getting calls from the store or bank about now!)
2. If you fall 2 or 3 months into arrears, creditors are far less likely to give you credit. So get up to date and don’t fall behind!
3. Pay no less than the minimum instalment each month! (Before you apply for the account, make sure you can afford this amount!)
4. To make sure you can afford your repayments, draw up a monthly budget for yourself and stick to it, shaving off unnecessary expenses if you need to. People who budget seldom get behind on their repayments. People who are really good at budgeting can even start paying off more each month and paying up their debts earlier – which saves an astonishing amount of interest (more about this elsewhere on this site!)
5. Most people are carrying a very heavy debt burden – the average South African spends 75% of his or her take home pay on debt! That doesn’t leave much for anything else, and it makes you very vulnerable to things like a rate hike. And as for saving for your retirement, or reaching your dreams – at 75% you can forget it. You have to reduce your debt – and the best way to do this is to pay more than the minimum payment on your accounts. Do it one at a time – and choose the most expensive debt first. This is the one with the highest interest rate – if you’re not sure which one that is, get on the phone and find out! Tip: it’s certainly not your home loan, it’s probably not your car, it could be your credit card, or another small loan or instalment plan.
6. Aim to reduce the amount of money that goes on debt every month to 30 – 50% of your after tax income. So if you get R5 000 a month after deductions, try and pay no more than R1 500- R2 500 on debt repayments. Seeing as home loans can be about 30% on their own, it means you need to tighten your belt, and pay off your other debts as fast as you can – one by one.
7. If you are unable to make a payment due to unforeseen circumstances, talk to the bank or retailer concerned and make alternative arrangements to pay back what you owe. Remember that they may well accept reduced monthly payments spread out over a longer repayment period – whatever you do, try to pay them something every month, if only to show them your goodwill and establish a payment record in the event they decide to take you to court. It is best to get an agreement in writing with them, that they will not take legal action, for the period of the repayment arrangement. It must be in writing because otherwise they will never stand by their word.
8. While you may not be able to afford the higher instalments and your account may not be getting paid off quite as fast as you’d like, so long as it is going down you are on the right track. Just remember that all your effort in paying off your debts will only work if you do not take on more debt. So, when you are tempted to buy, remind yourself that you are trying to pay off your accounts and that it will be worth it to be patient for a while!
9. NB! No. 7, 8 and 9 do not apply to a debt on which there is already a judgment against your name! If you have what we call an old legal debt, you are really going to lose out if you pay it off in this way, through their collection attorneys. You will probably pay twice what you should! Many people valiantly pay these old debts every month and find that the balance never goes down and sometimes it even goes up! That’s because the costs are much higher than normal! You’re paying the lawyers now as well as the lender. So if you have an old legal debt, or a judgment against your name, speak to us about our Debt Settlement Plan™ and save yourself a lot of money!
10. If for some reason the creditor is not prepared to enter into a repayment arrangement you should be on the look out for a letter of demand followed by summons from a court. It’s really tempting to ignore it and hope it goes away, but you can be sure this never happens and it just gets worse. So never ignore the summons. It always pays to defend the matter and appear in court. Very often the magistrate will force the creditor to accept a payment arrangement that you can afford if you show the court your monthly income and expenses and explain how you are trying to sort things out. Provided you show that you intend to repay the debt and have been doing your best to make at least some payments there’s a good chance the judge will be sympathetic. Remember to point out that you have been making payments and aim to increase them as you get more in control of your finances. The courts don’t always side with the big guys – often they would like to do more for the little guys, but if you don’t show up, they can’t. So pay something, every month, bring along a record of your payments, and your salary slips, and tell the judge your side of the story!

It’s really worth getting started on this plan because it will relieve the pressure and start to get you in a healthier position with your money. Good luck!

A credit score is a summary of a number of positive and negative factors on your credit report that aims to predict how likely you are to honour your credit commitments in future. This rating is often used by lenders to identify the risk in offering you credit.

Are all credit scores the same?

No. There is no single credit score. TransUnion provide an Empirica® credit score on request. Experian have developed the Delphi® score and include it in all their credit records.

The Delphi ScoreL

Experian makes use of the Delphi® credit score that ranks your credit rating. This score will only appear on an Experian credit report. The score is calculated by a computer programme that takes all your credit profile information and converts it to a simple three digit number or “score”. The Delphi® score number will range between 0 and 750. Based on Experian Credit bureau data, the higher the number the more likely you are to meet your credit commitments in future.

The Empirica score:

Fair Isaac & Co developed a credit measurement tool in the 1950’s called the FICO® score. This score has become the basis for most other credit scores and the Empirica® score used by TransUnion is largely based on it.

How is a credit score arrived at?

Generally a credit score evaluates five main categories of information:

Payment history ( 35% of the overall score)

• Account payment information on specific types of accounts (credit cards, retail accounts, installment loans, finance company accounts, mortgage, etc.).
• Presence of adverse public records (insolvency, administration, debt counselling, judgments, bonds), collection notices, and/or adverse information concerning payment or non-payment.
• Severity of arrears (how long past due).
• Amount past due on arrear accounts or collection items.
• Time since arrear items, adverse public records (if any), or collection items (if any).
• Number of past due items on file.
• Number of accounts paid as agreed.

Amounts owed (30% of the overall score)

• Amount owing on accounts.
• Amount owing on specific types of accounts.
• Lack of a specific type of balance, in some cases.
• Number of accounts with balances.
• Proportion of credit lines used (proportion of balances to total credit limits on certain types of revolving accounts).
• Proportion of installment loan amounts still owing (proportion of balance to original loan amount on certain types of installment loans).

Length of credit history (15% of the overall score)

• Time since accounts opened.
• Time since accounts opened, by specific type of account.
• Time since account activity.

New credit (10% of the overall score)

• Number of recently opened accounts, and proportion of accounts that are recently opened, by type of account.
• Number of recent credit inquiries.
• Time since recent account opening(s), by type of account.
• Time since credit inquiry(s).
• Re-establishment of positive credit history following past payment problems.

Type of credit used (10% of the overall score)

Number of (presence, prevalence, and recent information on) various types of accounts (credit cards, retail accounts, installment loans, mortgage, consumer finance accounts, etc.).

Each of the above noted factors, along with others, are assigned a value and a weight. Different creditors assign different values or weightings, depending on their experience of how important each of these factors are in their market.

The results of these factors are then added up and combined into a single number. FICO® based scores can range from 300 to 800. The higher the number the better.In general terms, borrowers with reasonable credit typical have FICO® scores, which range between 600 and 800.

Company specific score cards

Very often creditors will use a credit bureau score together with an in-house score card, where they build their own credit score to aid in their decision making process.

Creditors will take different factors into consideration when building a credit score, based on the company’s specific credit granting policies. These scores differ between lenders and may even differ between the type of credit you apply for e.g. home loan, credit card etc. Often lenders will make use of credit bureau data, their own internal data and affordability data, such as the ratio of installment to income, to build a company specific credit score.

Why does my credit score change?

Your credit score is dynamic, it can change monthly as new information for the accounts you hold is loaded to your record. It is important to note that a minor change to your credit score is not likely to affect your ability to gain access to credit. However, a significant change can occur if negative information such as a judgment or serious payment default is loaded to your profile.

What minimum credit score do I need to gain access to credit?

There is no minimum credit score. Companies will take different factors into account when making the decision to grant credit, depending on their specific credit granting policies and appetite for risk. The acceptable credit score range is specific to the company that is granting you credit. So, if one company declines you for credit this does not mean that another will also decline you for credit.

Why is it important to use a credit score in the credit granting process?

A credit score looks at many different pieces of information and takes a fair view of both positive and negative information. This helps lenders in making responsible and impartial decisions about granting you credit, by removing bias in the credit granting process. It also improves the speed in which the decision to grant credit can be made.

Remember, a credit score takes into consideration all these categories of information, not just one or two. No one piece of information or factor alone will determine your score. The value of the information lies in looking at all the pieces of information collectively.

The importance of any factor depends on the overall information in your credit report. What is the general impression of your credit record? Does it reflect poor payment patterns or is it showing you stick to your payment obligations.

For some people, a given factor may be more important than for someone else with a different credit history. In addition, as the information in your credit report changes, so does the importance of any factor in determining your score.

Thus, it’s impossible to say exactly how important any single factor is in determining your score – even the levels of importance shown here are for the general population, and will be different for different credit profiles. What’s important is the mix of information, which varies from person to person, and for any one person or market over time.

Your FICO score only looks at information in your credit report. Late payments will lower your score, but establishing or re-establishing a good track record of making payments on time will raise your score.

While your credit record and the resulting score is important, creditors look at many things when making a credit decision including your income, your expenses, how long you have worked at your present job and the kind of credit you are requesting.

Your score considers both positive and negative information in your credit report.