Checking your credit record regularly can save you money. Belinda Beresford explains how
They know your name and where to find you. They know where you shop, how much you’ve spent and how high your cellphone bill is. They are the credit bureaux: collectors and vendors of information, about you, me, the person next door – and probably the whole Cabinet.
Anyone who has ever applied for a store card or telephone is probably aware that the application has been judged somewhere behind the scenes. But real awareness of credit bureaux usually only sinks in when the person processing your application comes back and, avoiding your gaze, announces you have been denied credit – you’ve been blacklisted. Alternatively, first contact may come with a menacing letter from a company which threatens to list you with a credit bureau if you don’t pay any outstanding debts immediately.
Actually, you’re probably already listed. Credit agencies have about 25-million people on their records, although only about 15-million are “credit active”. The bureaux are anxious to point out that they do not actually run blacklists. They provide the information that allows others to judge you – but they provide a score which can be used to make a decision.
This information will include things such as store and phone accounts and how regularly you pay, court judgments and liquidations. Details about bank accounts are not included, although information such as defaults on a bond will be recorded.
The media and advertising director of the Experian credit bureau, Rory Matthews, says there are approximately 38-million retail and cellphone accounts in the country, with an average of 2,3 accounts per person. Between 15% and 25% of accounts have negative data. Information Trust Corporation (ITC) has about 14- million customer profiles and claims 85% of them “reveal that consumers meet their credit obligations timeously”.
Matthews says every application for credit is judged on three criteria: affordability, as suggested by a payslip; stability, as suggested by factors such as age and marital status; and behaviour, or willingness to pay. This is where credit bureaux really come into their own – although they’ll be able to provide information for the other categories as well. For example, a credit bureau can give an estimate of your total retail debts as well as details on marital status. People under 24 are high risk, but those in their forties and fifties are low risk. Widowed people are usually reliable payers, followed in descending order by married people, singles and finally divorcees.
Although different companies checking with a credit bureau will have access to the same information, they use it differently. One shop may reject an application for credit, while another will approve it. The decision is influenced by the shop’s target market. For example, owning a home (with no defaults on the bond) is a good indicator of stability and creditworthiness. But a shop with a customer base of young black men would give less weight to this than one with an older white male clientele. History means young black men are less likely to have been able to afford a home.
Matthews says that while in the United States credit bureaux own the data they carry, in South Africa they are simply custodians – unless they bought the information. So errors have to be corrected by the organisation which provided the data in the first place. If you’re in dispute with a retailer, they can still decide to list you as defaulting. You have to give your point of view to the bureau, which will note it, but whether anyone checking your status takes any notice of your protestations is another matter. Every consumer has a right to see his or her credit profile. ITC’s profiles can be viewed through its agents, Compu-Pay. You make an appointment, give proof of identification and pay a R25 administration fee. Experian will give you the data free on the telephone. For about R15 they will fax it to you.
Unless you’re a serious defaulter, even a court judgment against you won’t necessarily mean you’re consigned to a credit wilderness. For example, Matthews says many retailers ignore medical judgments under R250 to prevent individuals being adversely affected by a medical aid’s inefficiency.
Information is supposed to be automatically deleted from credit bureaux records after a certain time. Court judgments are removed after five years, defaults and adverse information after three years and account information after two years. Inquiries about your credit profile are erased after three years, while sequestrations and liquidations take a decade.
Credit bureaux are also used to combat fraud. Agencies classify three types of credit fraud: application fraud, when people who know how credit scoring works manipulate application data; impersonation, when someone tries to get credit in your name; and syndicate fraud.
Remember your information profile can also affect how much you pay for credit. Bad risks tend to pay higher interest to compensate for the higher chance of defaulting. So check your credit record regularly. Do it when you fill in your tax return.
Next week: How to repair your credit history