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Applying for finance? Do a credit search first!

Article provided by SizweNtsalubaGobodo.

An incorrect credit listing can throw well-laid plans of applying for finance off-course.

There are articles by the ton about what you need to do to get funding ready, but few give you this simple advice: Do a credit check. I can hear you saying, ‘But my finances are in order.’ That might be the case but we are increasingly seeing incidences of people who are surprised by incorrect listings of which they were not aware.

The world is increasingly interconnected and digitised and while this often makes for streamlined processes and service, it can also create a lack of proper communications between departments of large entities like banks, cell phone service providers and the like.

Here’s an example. Recently a client was preparing to buy a home. He signed the offer to purchase which afforded him 30 days to obtain a mortgage bond. The purchase was off-plan and he had signed in the pre-development phase at a lower purchase price. He was quite confident of his ability to obtain a bond from an affordability, as well as a credit worthiness, perspective. He duly submitted his application to the four major banks and received four prompt rejections. The reason? An amount of R1106.08 listed against his name by a cell phone service provider. The listing was for non-payment which had been referred to legal.

The problem with the listing was that he had cancelled the cell phone contract the year before and when he continued to receive bills had attempted to call the customer care line and had sent two emails to which he received no response. The bills stopped in October 2015 and he assumed they had found and rectified the error. He received no legal notices before the listing.

Despite his otherwise flawless credit history and having sufficient cash reserves he was turned down by each bank, including his own who he had been with for 16 years. The reason is that banks take a very narrow view about these matters unless you have access to a private banker. A listing for non-payment is seen as an indication of unwillingness to repay debt which automatically gets your finance application dismissed.

He considered taking legal action as the incorrect listing could result in him not receiving a bond within the 30 days period and having to put in a fresh offer on the property which would have appreciated in value by R150 000.

We suggested, as a first step before legal action or approaching the credit ombud, that he dispute his listing with a credit union (such as Transunion or Experia). The process for lodging a dispute with a credit union requires that one call the dispute hotline and receive a reference number, fill out a dispute form and email it and proof of identity to the disputes email address. Once you receive a confirmatory SMS, the investigation period begins and this process takes up to 20 business days.

Despite our client receiving confirmation from the cellular service provider that they had not properly cancelled his contract and, further that they had picked up the error in October 2015 but failed to reconcile his account or remove his account from legal, the credit union process must be seen out.

To date, our client is awaiting a refund of a balance owed to him by the cellphone network and awaiting the clearing of his name by the credit union. Fortunately the developers have been understanding and have not cancelled his offer to purchase for failure to meet the condition of receiving a mortgage bond within 30 days.

This is a familiar tale to us in a technological age where people act as automatons to processes and systems and do not communicate with each other. We have also seen a number of listing by medical service providers for small amounts which were not covered by medical aid and for which no legal notice was received.

Although the soundness, from a compliance perspective, of these listings is questionable it puts a spanner in the works of applications for financing for homes and businesses alike. In both these instances time is of the essence.

Our advice:

  • When you decide to apply for funding first get your annual report from a credit union like Transunion or Experia. You are entitled to one free annual credit report a year.
  • The credit reports are fairly easy to navigate. They will highlight any risks or listings.
  • Contact the entity who has listed you and request that they investigate the matter in parallel with the credit union.
  • Lodge a dispute of the listing with the credit union. This will usually require you to call a number, obtain a dispute form and supporting documents and complete a proof of identity form.
  • Once you receive an SMS confirming receipt of your dispute the matter will take 20 days to be investigated and a finding to be made – this is a long time in real terms – hence do this well in advance of your application for funding.
  • If you are unsuccessful approach the credit ombud.
  • A useful tip is to approach the consumer media about the listing, they tend to obtain quicker results than the internal complaints mechanisms of most entities.

SizweNtsalubaGobodo is a proud partner of the National Small Business Chamber (NSBC).