If you’ve ever taken a look at your credit report and felt a frightful sense of dread and confusion when trying to decipher it, don’t worry because you’re not alone.
Like most of us, you’ve probably thought that whatever’s on your credit report may as well be written in some exotic unintelligible language.
Unfortunately, the vast majority of South Africans are decidedly lacking in their understanding and knowledge of the information held within their credit profiles, as well as what that information even means and who even uses said information.
To clarify this topic for the average Joe and Jane out there, moneysmart will look at those fundamental aspects of credit reports of which anyone with any sort of credit should be aware.
Let’s start with the credit report basics:
What is a credit report anyway?
It’s a comprehensive report of your entire credit profile as per the information held at the various credit bureaus (credit rating agencies).
Essentially, your credit report describes your entire credit history, or how well or poorly you’ve managed your credit (think loans, mortgages and credit cards) up until now.
The credit bureaus use the information sent to them by your credit providers to compile your credit report and determine your overall credit score, which is a score out of 1000 points.
Credit providers, whether current or potential (think banks, credit card companies and loan providers), then use this information, and particularly your credit score, to gauge your creditworthiness, i.e. how likely it is that you’ll pay them back for the credit that they’re providing.
So what kind of info is actually on my credit report?
Whenever you apply for credit (whether a personal loan, home loan or credit card), the credit provider will look at your credit score and the information in your credit report to determine your credit risk.
Based on this information, they’ll decide whether or not to give you the credit for which you’re applying.
It therefore makes sense that having a positive credit score with a good credit profile is an important part of anyone’s overall financial life.
The following information can be found on your credit report and can help credit providers decide whether you’re a good candidate for credit or not:
- All past and current credit accounts
- All past and current credit enquiries
- All past and current credit defaults, late payments etc.
- All your credit balances
- All your credit settlement amounts
- Any judgments or legal orders against your name
Who will actually look at my credit report?
As mentioned above, whenever you apply for credit in any form, the institution (or credit provider) from whom you’re applying, will take a look at your credit report to get a better understanding of who you are as a credit customer.
Other entities that may check up on your credit profiles include potential employers, landlords and other service providers (such as insurance companies).
Because your credit report – and credit score – is the primary means by which your application (whether for credit, a job or even a rental property) will be deemed successful, it’s vital that you do all you can to maintain a positive and up-to-date credit report.
Credit Report Tips to Help and Protect You
Dispute where necessary
It’s important to realise that credit bureaus can (and frequently do) make mistakes. These mistakes can manifest as errors, inaccuracies or outdated information on your credit report.
These mistakes can have a negative impact on your credit profile and overall credit score and as such you should regularly check your credit report for such errors.
If you find any mistake on your credit report you can lodge a dispute with the credit bureau in question.[tip title=”Read”]Credit Report Errors and How to Fix Them[/tip]
Close old accounts
Having old and unused accounts can have a detrimental impact on your credit profile and leave you liable for unnecessary fees.
Leaving these accounts open also increases your chances of being a victim of identity theft and fraud.
A good rule of thumb is therefore to close old and unused accounts that may still be lurking around your credit report.[tip title=”Read”]How to Improve Your Credit Score: Close Old Accounts[/tip]
Negotiate for better terms
Let’s face facts. Sometimes, no matter how hard you try; it’s just impossible to stay on top of all your credit repayments every month.
It’s at times like these that people are left wishing for better rates and repayment terms.
Many people aren’t even aware that it’s possible to negotiate with their credit providers for better repayment terms and lower interest rates.
If you’re struggling to cope with your mounting monthly debt payments, try contacting your credit provider(s) and negotiate for better repayment terms and rates.[tip title=”Read”]How To Negotiate With Your Credit Providers[/tip]
Keep it safe and secure
As with all private and confidential information, it’s best to ensure that this stuff if kept to yourself at all times.
Make sure you don’t leave yourself open to be victimised by fraudsters and criminals by sharing your personal information (such as the information held on your credit report).
Keeping your information safe and secure will go a long way in ensuring credit fraud doesn’t negatively impact your credit profile and ruin your chances of getting more credit in future.[tip title=”Read”]Credit Card Fraud: How to Prevent It and What to Do if it Happens and The Impacts of Identity Fraud.[/tip]