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Common myths about the credit amnesty

25 Oct 2013

The past few months have had consumers eagerly waiting to hear how their ‘bad’ credit records will disappear as a result of the DTI’s Removal of Adverse Information Project, which has now been given the go-ahead by Cabinet. 

You have the right to challenge any information you believe to be unfair or inaccurate.

Before consumers get too excited at the prospect of more credit for Christmas shopping, it is vital that everyone understands which information will be removed and whenthis will happen, and this is yet to be finalised. The public comment process is still underway and it is likely that Christmas will come and go before the amnesty process is implemented. 

Credit Ombud, Manie van Schalkwyk, says they have found that many consumers, both via their call centre and outreach programmes, are already asking questions about the proposed removal of adverse information from their profiles.  

He says the removal of specific adverse information from a consumer’s credit profile, does not mean that the entire credit history of that consumer just goes away. 

There are some major misconceptions coming through from consumers about what the credit amnesty means for them. 

Myth

My debt will be written off and I will no longer be liable for paying off the debt. 

Fact

Just because the listing on the credit bureaux can no longer be seen, it does not mean that the actual debt also disappears. The Credit Amnesty will only remove credit information i.e. listings on the credit bureaux, not actual debt owed.  

In fact, credit providers may take legal action to recoup their money from non-paying consumers. 

Myth

When a default listing is removed, there will be no other record that I was in arrears on my account. 

Fact

Even though adverse listings will be removed through the removal of adverse information process, it does not imply that no one will have any knowledge of how you conducted your payments.  

Your credit provider will have a history of how you paid your account and may decide not to grant you further credit or increase your limit if you did not conduct your payments well. 

On the up side, Van Schalkwyk says those consumers who have conducted their accounts well can take advantage of the fact that there will be a history of their good conduct. Having a good credit history will stand them in good stead when they try to access credit to buy a home, pay for their children’s education or even secure employment. 

Myth

It will be easier for me to get a loan. 

Fact

You will still have to prove that you can afford the instalments on your loan and without full credit information to guide them, credit providers may become stricter and even charge higher rates because of the greater potential risk of bad debt. 

Consumers now have the opportunity to take ownership of both their debt and their credit profiles, and would be well advised to take these steps to repair or improve their own credit records, without having to wait for an amnesty to rescue them.

  1. Get a free credit report from the credit bureaux.
     
  2. You have the right to challenge any information you believe to be unfair or inaccurate – if you are not happy with the response of the credit bureau, you can escalate your query to the Credit Ombud.
     
  3. If you cannot afford to repay your creditors, draw up a strict budget, work out the maximum you can afford, and then negotiate with your credit providers to pay your debts.
     
  4. Pay at least the minimum due as agreed with your credit provider.
     
  5. Always pay your accounts on or before the due date.
     
  6. Make sure that you close any accounts you are no longer using (the number of accounts you have open may affect your credit score).
     
  7. Reduce limits on credit cards if you do not use them or need them

For more information, visit www.creditombud.org.za.

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