Your credit report is a very important financial record. It provides banks and other financial
institutions with a clear picture of your ability to manage debt. If you are applying for a loan,
your bank will use the report in its decision making process. Additionally, the bank will
determine the loan interest rate based strictly on the information contained in your credit
report. Therefore, it’s critically important for you to maintain a clean financial profile
throughout your life.
Your credit report certainly contains a great deal of valuable information. However, in regard
to banks and other lending institutions, the most significant piece of information is your credit
score. All credit reports are assigned a numerical score, based on the individual’s previous
payment behaviour and overall financial background. Credit scores can fluctuate on a monthly
basis as new information is gathered and recorded.
Your credit score can range between 330 and 850. As your score increases, banks are more
willing to approve your loan. Additionally, a higher credit score will help you obtain a low
interest rate on your loan. As a general rule, most banks prefer to work with customers with a
credit score above 720. If your score is below 680, you could have a difficult time finding a
bank willing to provide a loan. Please review the following credit score range.
Credit Score Range
750 + Excellent
720 – 749 Very Good
680 – 719 Good
620 – 679 Poor
Below 620 Very Poor
The best way to manage your credit report is to prevent any negative information from
appearing on the report. Let’s review some of the data that could negatively impact your
credit score. More importantly, we will discuss how long the negative information will remain
on your report.
Court Judgement
A court judgement is an instruction from the court requiring you to pay an outstanding
amount. This type of information will remain on your credit report for five years. However, if
you satisfy the judgement by paying the full amount, it will be removed from your report when
the credit bureau receives notification of full payment. Additionally, the negative information
will be removed if the court rescinds the judgement.
Always remember, it’s your responsibility to verify that the court judgement has been
eliminated from your credit report. Therefore, you should obtain a proof of payment
document from the original credit provider. If the judgement has not been removed from your
report, send the proof of payment document to all four major credit bureaus.
Credit Enquiry
Many consumers are not aware that credit providers will obtain a copy of your credit report
each time you apply for a loan. This is known as a credit enquiry. Each credit enquiry will
remain on your report for one year. It’s never a good idea to have an excessive amount of
enquiries because it will reduce your credit score. Therefore, you should only apply for a loan
if it’s absolutely necessary.
Debt Restructuring
Very often, consumers who are having financial difficulties, will use a debt restructuring
program to help manage the debt. All debt restructuring applications will remain on your
credit report until a clearance certificate has been issued.
Credit Report Complaints
If you believe your credit report is inaccurate, you should file a formal complaint with the
credit bureaus. However, if the complaint is rejected, this information will remain on your
credit report for six months. In order to avoid any negative activity on your report, don’t file a
complaint unless you are absolutely certain that your credit report is inaccurate.
Adverse Classifications
There are two types of adverse classifications that could potentially lower your credit score.
An enforcement action will be levied against you if your credit provider sends a letter of final
demand when your loan becomes delinquent. This type of negative information will be linked
to your credit profile for one year. The enforcement action will be removed if you pay the loan
before the end of one year.
Banks and other credit providers can have you classified as a late payer if you fall behind on
your loan. This is known as a consumer behaviour classification. This adverse data will be
attached to your credit report for one year. If you pay the full amount of the loan, the credit
bureaus will remove the consumer behaviour classification.
Administration Order
An administration order is granted when a debtor is unable to meet his/her financial
obligations. For example, if your expenses exceed your monthly income, you can file an
application with the court in an effort to obtain an administration order. This information will
remain on your credit report for five years, or until the order is rescinded by the court.
Sequestration
Sequestration is defined as the surrender of an individual’s financial affairs to the High Court
under the governance of the Insolvency Act 24 of 1936. It allows the debtor to write off a
portion of his/her debt that has accrued over the years. A sequestration order is linked to your
credit profile for five years.
Trace
If your lender is unable to locate you, a trace alert will be attached to your credit report. If the
credit bureau receives updated information concerning your new address, the bureau will
contact your lending institution.
As you can see, there are several negative items that can be attached to your credit report.
The best course of action is to maintain a financially healthy lifestyle in order to successfully
manage your credit score. A high credit score will pay huge dividends as you journey through
life.
Negative Information on Your Credit Report
A court judgement can be attached to your credit report for five years
If the judgement is paid in full, the credit bureau will remove the item from your report
Credit enquiries will stay on your report for one year
Avoid excessive enquiries by reducing loan applications and credit card applications
Debt restructuring will remain on your credit report until a clearance certificate is issued
Don’t file a credit complaint unless you are certain your credit report is inaccurate
Your lender can levy an enforcement action if your loan is in arrears
A consumer behaviour classification can be added to your report for late payments
Enforcement action and consumer behaviour will be linked to your report for one year
Administrative order will stay on your credit report for five years
Sequestration will negatively impact your credit score for five years
Trace alerts can be added to your credit report if your lender is unable to contact you