Role of Credit Bureaus
Did you know that a credit bureau plays a key role in your ability to get credit?
As consumers we often hear about how important it is to pay our credit accounts on time and never miss payments so that we can build a good credit reputation and so that no negative information is reported to a credit bureau. This message is especially important, as credit bureaus play a big role in the credit world and have a huge impact on our everyday life, especially when it comes to applying for credit to purchase an asset or to take care of an unforeseen emergency. It is for this reason that we need to understand the role that credit bureaus play, but also the value and importance of our credit reports and scores in our everyday lives.
Before we take a closer look at credit bureaus and credit reports, let us first understand how the world of credit works and how we all fit into the credit system. In the credit system, there are three main role play- ers that play a part in any lending decision, namely you, the consumer, the credit provider, and the credit bureaus. The image below explains this relationship in greater detail.
The role of the credit bureau
As mentioned, credit bureaus play a key role every time you apply for loan, credit card, overdraft, vehicle finance or home loan. Credit providers specifically make use of the credit information hosted by a credit bureau on your credit accounts as well as how well you pay those accounts to determine whether or not you will be likely to honour your credit agreement. This information is given to credit providers in the form of a credit report and you need to give permission to the credit provider to obtain a copy of your report from the credit bureau.
Although you have the right to decline permission for the credit provider to access your credit report, your credit provider will more than likely decline your credit application because without the information on your credit report it will not be able to accurately and fairly determine your current financial status and whether or not you are a good borrower. Remember that the NCA places a duty on each credit provider to use all information available to make a responsible decision to grant you a loan or not. Without having access to your credit report, it is within its right to fairly decline your credit application.
There are some common misconceptions or ideas that many people have about credit bureaus, and we will discuss some of them here to help clarify their purpose for you.
- Credit bureaus decline credit applications. This is incorrect. Credit providers decline applications based on an affordability assessment and credit reports provided by credit bureaus. The role of credit bureaus is simply to provide a report to credit providers on your credit profile.
- Government owns credit bureaus. This is incorrect. In fact, most credit bureaus are privately owned and run, but must register and comply with the NCR, who reports to the Department of Trade and Industry.
- You can pay money to change your credit profile. This is incorrect. Credit bureaus are for-profit companies and are in the business of selling information that is obtained through subscribers, who in turn buy the compiled information from the credit bureau. They can also charge you for a credit report if you ask for more than one a year. However, no money is charged for querying or disputing your credit profile, and you cannot ask or pay for any information to be deleted unless an investigation has concluded that the information is incorrect or fraudulent.
- Credit bureaus sell your information. This is true. They give credit providers access to their in- formation at a premium. They also compile marketing lists and sell these to companies who have requested this. These lists will not contain your private and confidential information; only your public domain information such as name and contact details.
- I cannot contact a credit bureau directly. This is incorrect, because you can contact any credit bureau and request a copy of your free credit report once a year via their website or through their call centre. You can also request an extra copy at a cost. You can also query or dispute any information on your credit report by contacting a credit bureau and following their dispute process.
Get in Touch
0861 482 482
0861 105 665
0861 514 131
0860 937 000
086 726 5183
This is your biographical information and includes your full name, any known aliases, current and previous addresses, identity number, year of birth, and current and past employers.Your credit report includes an ad- dress section that shows all your previous and current addresses. Every time you apply for credit or update your contact details, the postal and residential addresses are added to your profile.
Telephone numbers are also listed on your credit report. In the same way in which your address is captured, so too are your telephone numbers whenever you apply for credit or a loan. All cell phone numbers, residential numbers and work numbers that you used when applying for a loan or credit will reflect here.
Each credit report also contains an employer’s section where your previous and current employment is list- ed. This section includes the employer’s name, your occupation and employment date. It can also contain information such as your employee number and type of employment if you fill in this information on the credit or loan application form.
Information about all the accounts you have with banks, retailers, credit card issuers and other lenders, so that credit providers can determine what your current commitments are and whether you can afford to take on more credit, is reflected on your credit report.
On your credit report you will see a summary of your accounts, which includes the current combined balance of all your credit facilities, the combined instalment value, the cumulative arrears amount and how many months you have been in arrears on the account.
A section is also included that contains the details of all your accounts. These details include information such as your account number, the date you opened the account, your last payment date and date of last update, your overdue balance, the payment frequency, and the number of instalments.
Payment profile information
This indicates how well you manage and repay your debt.
Your payment history is normally indicated by a series of 24 numbers. These numbers indicate your payment record on an account over the past 24 months. If you have not missed a payment, the number will show a 0. If you have missed one repayment, the number will show a 1 for the corresponding month. Two repayments missed will show a 2, and so on.
If after missing several repayments the outstanding balance is paid off in full, the next number will again be 0. A question mark indicates that no information was received from the institution where the account is held for the corresponding month or that the account submission was rejected due to errors and returned to the supplier to rectify so as not to discriminate against your credit record.
Public records information
The section containing public records information will contain information on judgements, rescindments, defaults and notices and is an indication of whether any legal action has been taken against you for the non-payment of credit.
These are the details of those who have obtained copies of your credit report within the past year (two years for employment purposes).
This is a detailed list of all previous enquiries that were made against your name. This means you will be able to see who has looked at your credit report and when. These enquiries will usually take place when you apply for credit with a credit provider and they need to access your credit report to determine your creditworthiness.
It is very important that you check that no enquiries were made of which you are not aware, as this could be an indication that someone is trying to fraudulently apply for credit in your name.
If you have ever been a victim of fraud or have been under protective registration, a fraud alert will reflect on your credit report. This report will include the category that indicates the type of fraud as well as a sub- category that gives further details. An incident date is also given. This information is supplied by the SAFPS.
If you are under administration or debt restructuring or have a fraud alert against your name, a warning will appear on your credit report. This warning will serve to alert the credit provider that there is important information on your credit report that he or she should take note of.
Elements of your credit score
How long is information kept on my credit report?
The information shown on your credit profile, both positive and negative, is not shown for an indefinite period. Retention periods are prescribed by the NCA. This allows you to improve upon your credit score and profile so that you will have better access to credit in the future.
It is the responsibility of the bureau to verify the information given to them. They must then keep the information for a prescribed period.
Many consumers often ask what happens when you are ‘blacklisted’. You must understand that there is no such thing as ‘black- listing’ in South Africa. In the past, when people went bankrupt, they were added to a list kept by merchants to refuse credit and services to bankrupt persons. Some- times these lists would even be posted publicly, and so this list was called a blacklist. The name stayed in South Africa because credit bureaus only used to keep negative information about consumers, so if you had a credit profile it would only be negative, and so the name ‘blacklist’ seemed to fit.
However, for many years credit bureaus in our country keep positive as well as negative information about consumers, and so the name ‘blacklist’ no longer applies. Positive information shows ac- counts that are up to date, or paid up, and help you get credit. Today, the information given on your credit report is simply an accurate and honest picture of your current financial status.
|Categories of consumer credit information||Description||Retention period|
|Details and results of disputes lodged by consumers||Number and nature of complaints lodged and whether a complaint was rejected. No information may be displayed on complaints that were upheld||6 months (previously 18 months)|
|Enquiries||Number of enquiries made on a consumer’s record, including the name of the entity/person who made the enquiry and a contact number, if available||1 year (previously 2 years)|
|Payment profile||Factual information pertaining to the payment profile of the consumer||5 years (no change)|
|Adverse classifications of enforcement action||Classification related to enforcement action taken by a credit provider||1 year (previously 2 years) OR Within the period prescribed by Section 71A* of the Act (new requirement)|
|Adverse classifications of consumer behaviour||Subjective classifications of consumer behaviour||1 year OR Within the period prescribed by Section 71A* of the Act (new requirement)|
|Debt restructuring||As per Section 86 of the Act, an order given by the court or tribunal||Within the period prescribed by Section 71(1) of the Act (new requirement) OR Until a clearance certificate is issued|
|Other civil court judgements||Civil court judgements, including default judgements||The earlier of 5 years OR Until the judgement is rescinded by a court or abandoned by the credit provider in terms of Section 86 of the Magistrates Court Act 32 of 1944 OR Within the period prescribed in Section 71A of the Act (new requirement)|
|Maintenance judgements in terms of the Maintenance Act 99 of 1998||As per court order||Until the order is rescinded by a court (new requirement)|
|Sequestration orders||As per court order||5 years or until rehabilitation order is granted (previously unlimited)|
|Rehabilitation order||As per court order||5 years or until rehabilitation order is granted|
|Administration order||As per court order||5 years (previously 10 years) OR Until order is rescinded by court|
In the next section, you can learn how to take steps to improve your credit score and profile to help strengthen your negotiating power when applying for credit.
Credit bureaus keep both positive and negative (adverse) information on consumers, and they make this information available to credit providers, debt counsellors or employers when requested, and with your permission. The NCA and regulations stipulate the retention of specific consumer information, as well as how long adverse information can be reflected on your credit profile.
Adverse information is information relating to consumer behaviour and includes classifications such as ‘delinquent’, ‘default’, ‘slow paying’, ‘absconded’ and ‘not contactable’, and actions such as ‘handed over for collection or recovery’, ‘legal action’ and ‘write-off’.
No adverse information regarding a credit agreement may be retained by a credit bureau once all arrears owing under that agreement is settled. Upon settlement of the amount in arrears, the credit provider must advise the credit bureaus that the arrear amounts have been settled, and the credit bureau must update the consumer’s credit records within seven days of being notified as such.
That means if you have paid up a judgement debt, or you have settled other arrears, and it is still reflected on your credit report, you can contact a credit bureau directly to dispute the incorrect or outdated information. You may contact any of the credit bureaus on the numbers below for enquiries relating to the removal of adverse information and paid-up judgements:
- TRANSUNION – 086 148 2482
- EXPERIAN – 086 110 5665
- EXPERT DECISION SYSTEMS (XDS) – 086 112 7334
- COMPUSCAN – 086 151 4131
- CONSUMER PROFILE BUREAU – 086 726 5183
Role of credit bureaus: FAQ
What is the credit bureau?
A credit bureau is a company that gathers and stores your financial information, update your credit history, and compiles your credit profile into a credit report. This is a record of your credit information indicating how you manage and repay all credit extended to you. They make this information available to you, and sell this credit information for a fee to creditors so that they can make a decision on granting loans.
Credit bureaus play the following role:
- They provide credit providers with accurate credit information to make informed decisions about credit applications.
- Credit bureaus reduce the credit provider’s risk of lending to consumers that cannot afford to, or are not willing to, honour their credit commitment.
- They protect you as the consumer against over-indebtedness by allowing credit providers to grant credit responsibly.
What are credit reports?
To avoid any unwelcome surprises or embarrassment, it is important to see a copy of your credit report before you apply for credit such as car loans, mortgages or credit cards. Errors in credit reports can occur, and you can query or dispute any information on your credit profile.
Remember, your credit report shows your ‘credit reputation’ and you need a good reputation for the credit provider to take a risk on you and lend you money. You should understand how to read a credit report.
A credit report is a history of your borrowing behaviour and includes the information discussed in detail below.
What is a credit report?
A credit report is a record of your credit activities. It lists any credit accounts or loans you may have, the balances, and how regularly you make your repayments. It also shows whether any legal action has been taken against you because of unpaid accounts. The NCA says that you are entitled to one free credit report every year, after which you will pay a minimal cost per request.
What is a credit score?
Your credit score is drawn from your credit report. The key information that is used to calculate your credit score includes the length of your credit file, the types of credit used, your requests for credit, your payment history, and your balances and credit utilisation. Information such as race, gender, where you live and marital status is not used in calculating credit scores.
A good rating helps you reach your financial goals, while a poor rating limits your financial opportunities. As your credit report influences whether you are able to buy a house or get any kind of credit, it is extremely important to protect your credit score by making loan and account payments on time and by not taking on more debt than you can handle.
The higher your credit score, the lower your risk to the credit provider, and the lower your score, the higher the risk you present to the credit provider.