Have you cancelled a contract recently? If you’re no longer receiving an account in the mail, you can safely assume that this contract no longer has a bearing on your credit score, right? Wrong.
A few years ago, I bought a cellphone through a cellphone company and paid it up. But I continued to receive accounts. Eventually, I was able to have the debit order reversed and achieved a nil balance, getting some money back in the process.
Now let’s jump forward to the present.
In order to write an article about credit ratings, I decided to take a peek at my own credit rating, which I last checked in 2008.
In brief, a summary of your rating will tell you the following (please note that I’m not using my personal details here):
Number of accounts you hold: say, 11.
How many judgments, notices, defaults and collections you have had against your name: say, 0.
Total balance exposure: R85 330
Total monthly exposure: R4 811
Total overdue Amount: R0
Now, this “total balance exposure” is, in effect, an estimate of the total amount you will be required to pay to settle these 11 accounts held in your name.
Why, I asked, was this amount so high. (In my case, I have only two active accounts, and a handful that have been cancelled).
Selwyn Naidu, a consumer relations consultant at Experian Credit Bureau, explained to me that the amount reflects that my cellphone contract still falls within that exposure estimate, pushing my credit risk up.
Technically speaking, the higher the figure, the more risk to a company granting you a loan.
Selwyn advised me to speak to the fraud and legal branch of the cellphone company so that they are able to inform the bureau that my account has, in fact, been closed.
This is a salutary lesson for consumers who may assume that, just because they are no longer receiving accounts in the mail, their credit records automatically reflect account closure.
To obtain a one-off, free credit report from one of the four main credit bureaus in South Africa, visit the following websites:
http://mytransunion.co.za
www.creditexpert.co.za
www.compuscan.co.za
www.xds.co.za
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