You know how much money you have in the bank, you know what your budget is for groceries and you have a pretty firm grasp on your finances, in general – but do you understand the genuine state of your creditworthiness?
Reviewing your Credit Report is as important an admin task as balancing the books – knowing where you stand and why, when it comes to your ability to maintain a sound borrowing history, and what outcome you should be able to expect if you’re planning on applying for credit soon.
In determining your suitability for credit, credit providers (think banks, retail stores or service providers like the mobile networks) evaluate your credit history - how and when you pay your bills; how much debt you’re liable for and how your credit behaviour stacks up against that of other ‘borrowers’ amongst other things. The summary of these assessment criteria is most often reflected as a three-digit number – your Credit Score.
While credit providers tend to take into account the Credit Scores generated by credit bureaux like TransUnion, each also has their own assessments – and each credit bureau could even produce a different result, depending on how they weight the criteria they’re measuring you on. Credit providers make their own decisions based on that basket of information, and two different providers may make completely contrary decisions based on the same set of facts on an application for the same line of credit – it’s down to the way they assess you.
The information that informs your Credit Score is contained in your Credit Report – a document every South African is entitled to access for free, once per year, from any credit bureau. Your Credit Report is a comprehensive summary of your personal information, employment information, your credit summary and your payment profile.
Your credit summary contains information about the things which could affect your creditworthiness, including your history of defaults, notices or judgements, as well as a snapshot of any amounts you currently owe on credit. Your payment profile offers a summary of all the accounts you currently have open, as well as a 24-month snapshot of how you service them – from your credit card to your cellphone account, insurance and car & home loans.
Reviewing your Credit Report will give you some insight into your suitability for applying for credit, in the event that you’re planning on applying to make any new big-ticket purchases or open new accounts. It’s also important to check your Credit Report for anything out of the ordinary – from your personal details to accounts you may not recognise. While some may be simple administrative errors, others can point to potential identity theft situations, which can have a massive detrimental impact on your personal and financial life.
Once you’re aware of your financial status via your Credit Report, you can make changes to improve it, if need be, by paying attention to the major factors on which it is based: your account payment history; your level of debt; negative information; the length of your credit history and your account application and enquiry activity.
Since your Credit Report is simply a snapshot of how you’re managing your credit at a particular moment in time, it’s relatively easy to change it by making positive changes to your credit consumption behaviour. You can download your Credit Report once a year for free from TransUnion – and get added insight into your Credit Score for just R80.