A “Credit History Report” is, essentially, a type of biography. But instead of anecdotes and tales of adventure it spells out, in detail, your activities as a credit user. It provides to you or a third party (with your permission. watch that small print!) your current and previous residential addresses, current and previous employer details, telephone and cellphone numbers, full details of all your current and previous accounts (Retailers, Credit Cards, Vehicle Finance, Home Loans, short-term loans etc. etc.). Critically it also lists a 24-month “Monthly Payment Behaviour” on those accounts noting all late payments of failed payments.
Why is this history important?
Consumers applying for Home Loans are often declined because of an ‘adverse’ Credit Report. These clients do not necessarily have judgements or defaults appearing against their name (creditors haven’t handed them over to lawyers), but any unpaid or late payments present show a bank that the home loan applicant is incapable of keeping their finances in order. These clients are considered high risk and given the economic climate banks have become extremely wary of granting (often further) finance to someone with a poor payment behaviour.
It is of the utmost importance therefore that consumers ensure that all accounts are paid by the due date. For instance, if an account is due on the 31st of a month and the consumer pays it on the first or second day of the next month, the retailer will have listed the account as “unpaid” for that month and this will reflect under the consumer’s monthly payment behaviour.
If this happens often enough it affects the consumer’s “Credit Score” and will seriously prejudice his chances of being granted a home loan. Remember: the account has actually been paid … albeit a few hours after the “due date”, but the client’s “payment behaviour” will have been affected!
Unfortunately the harsh reality for many South Africans is that they are not forgetful or making errors with their repayment plans: they simply cannot repay the debts they owe. Reports indicate that 10 million South Africans have accounts that are, at best, in arrears. This is a national crisis and much of the unrest in the country, I believe, is caused by this indebtedness. Government’s solutions (like the Credit Amnesties) do nothing to get to the root cause of the problem: poor financial education in South Africans generally and the lenders that prey on them.
It is very important that you know your credit status BEFORE you embark on viewing properties for purchase.
If you apply for a home loan and it is declined because your Credit Report reflects “poor payment behaviour” such decline leaves a “negative footprint” which, in turn, could prejudice any future application for finance!
All our applications start with a credit check. We do this because many applicants are completely unaware of what their credit score is. They often assume that it will be perfect only to find that they have multiple late payments or even judgements against them. Often this is due to a misunderstanding with or a mistake on the part of the creditor but we have seen cases of identity theft and fraud. Terrifyingly, you cannot take your credit score for granted.
Contact an expert
So if you’re thinking about applying for a home loan why not contact us for a Free Full Credit History Report? We could at the same time determine the home loan amount you can expect to be granted, thus enabling you to view properties in the appropriate price range safe in the knowledge that when/if you apply for a home loan it will be granted.
But be warned: Too many Credit Enquiries can also adversely affect a consumer’s “credit footprint”. When we request a customer’s Credit Report from the Credit Bureaux it is not reflected and therefore leaves no “footprint” on their credit history!
And for a humorous (but still scary) look at credit histories in the US watch Jon Oliver’s video here:
