These days, having debt is like having an opinion – everyone’s got one, if not more. You might even have fallen behind in paying some of them off. Then, one day, while you’re applying to open an account at a clothing store, you suddenly find out you’re blacklisted. Now all those credit providers, who were so keen to put money in your hands before, are turning up their noses at your applications for further credit. After all, what guarantee do they have that you will pay them back? This is why a healthy credit score is so important. Read on to find out how you can turn your turn your credit report around and reverse your relationships with your credit providers.
What Does It Mean To Be Blacklisted?
The term “blacklist” is thrown around quite a lot and can apply to a number of situations in the world of finance. Unfortunately, once you have been blacklisted by a creditor, it will remain on your credit history for at least two years, even after you have settled all your outstanding debts. Of course, you don’t have to be told that blacklist label makes you are persona non grata to most reputable credit providers. There are a few ways to balance out your good and bad credit information, but it is best to tackle the problem of being blacklisted with both eyes open.
So, let’s get informed and unpack some of the terms associated with the dreaded blacklist status:
- In Arrears
Your credit record will show you whether you have fallen behind on your scheduled payments, which will mean you are in arrears. However, it is unlikely any legal action will have been taken at this stage. If this is the case, you can still approach your credit provider to make arrangements to settle the debt and catch up on back payments. If you have a number of accounts that are in arrears, you would greatly benefit from contacting the National Debt Mediation Association, a non-profit organisation that can negotiate the terms of settlement with your creditors on your behalf. Unfortunately, this detail will stay on your credit report for a few years.
When your credit profile indicates that you are in default, it’s time to start getting really worried. Being in default will usually be indicated on your credit report as either “handed over”, which means your debt has been handed over to attorneys and you can expect a court order to follow in due course, or as “written off”, which indicates that your creditor doesn’t think it likely that you’ll be paying them back within the agreed-upon term. However, all is not lost; if you are still being contacted in some form by debt collectors, you still have the opportunity to negotiate terms, in which to pay off the outstanding debt. However, even if you manage to settle your debt, this information will remain on your credit record for at least two years and hurt your chances at gaining access to new lines of credit in that time.
A judgement is the most serious consequence of being blacklisted. After defaulting on your credit responsibility, your debt has been handed over to attorneys and a legal action has been put into motion. Such a legal action is difficult to reverse and can show up on your credit report for up to five years, even after you’ve paid off your debt and/or have had the judgement rescinded. Credit providers are not legally obligated to issue a letter that would have the judgement against you expunged and may well refuse your request for such a letter. Nevertheless, it’s worth asking.
How To Check If You Are Blacklisted
If you are feeling like a bit of a financial pariah, you can investigate your blacklist status by asking a credit bureau to compile a credit report and calculate your credit score based on your history. While these different credit bureaus may have different systems of criteria for calculating your score, they should all be able to tell you whether or not your finances are in the red.
This is one of the leading South African credit bureaus and for good reason. Among its services, Transunion offers you the option to receive an SMS with your blacklist status and a credit summary for a small fee. You can also get a full annual credit report from Transunion for free by registering on their website.
At the core of its many fantastic offerings for corporate and private clients, Experian offers comprehensive credit history information, so you can count on their assessment of your credit history. Get a free credit report from Experian every year by applying on their website.
Another of South Africa’s largest credit bureaus, Compuscan started out as the first positive and negative information credit bureau for small loan sectors. By now, they have perfected their analyses of credit reports, so you can count on their take on your credit report, which you can get for free each year on their website.
How To Fix Bad Credit History
Your low credit score could be due to a number of factors:
- missing payments or paying accounts late over the past 6 years,
- holding too few credit accounts (e.g. cell phone contracts, personal loans, etc.), which means you will have a shorter credit history and, therefore, a lower score,
- having court judgements or a record of insolvency on your credit history,
- having account balances that are too close to the credit limit, which may indicate that you rely too much on your credit options to make it through the month.
These are just a few of the elements that lower your credit score and muddy your credit history. However, there are a few remedies for a poor credit score:
- Get a copy of your credit report. Knowing where you stand on the credit ladder is the best place to start getting your financial responsibilities together.
- Make sure to make your monthly payments on time by factoring your debt responsibility into your monthly budget.
- Don’t take on too many debt responsibilities. Try to maintain only two credit cards as well as no more than two major debts like a home loan and car finance.
- Close any unused credit accounts. The fewer lines of credit available to your name, the lower the risk you are to potential lenders.
- Keep in mind that no credit history can be just as bad as having too much credit.
However, if you find yourself overindebted, you may way to consider applying for debt counselling. If you are receiving debt counselling, you can temporarily avoid being charged with a court order, since your debt counsellor can negotiate new payment terms.
Paying off your debts always looks good on your credit report and is a sure-fire way to turn your credit score from blacklist to A-list. While it may take some time to work past some of the dirty mistakes on your credit record, there is hope of improving your credit score to the point where it is an advantage to you, rather than a disadvantage, when applying for new credit in the near future.