Have you struggled to pay back a credit? Do you know what your credit score is? By not taking responsibility for your credit reputation, you may suffer under the burden of bad credit. In this article, we look at a discussion between Mike Anderson (NSBC Founder & CEO) and Paul Nel (Innovation Consultant) from Experian on the burden of bad credit and its impact on consumers and businesses.
What are the long-term effects of a bad credit score?
Some people are ashamed or shy to look up their credit score, but this is a piece of data about you. This data reflects your credit reputation, and it is important to know and understand your credit score.
The credit report is the information the credit bureau has about you and what credit providers look at when they decide to offer you credit. If your credit score is poor, and you let it linger and don’t clean up the report, you are seen as a risk and credit providers don’t want to be involved with someone who they see as risky.
If the credit providers do choose to give you credit, they may charge you a higher interest rate, or offer less than what you applied for or ask for a high level of security or collateral. By not regularly checking your credit report you could be limited in the credit you get for a long time.
How can businesses mitigate risks associated with customers with poor credit?
When considering offering a customer credit, you need to ensure you analyse your customer according to the law. The regulations are there to protect the consumer and the business. You will need to get the consumer’s consent to access their credit score. If you do come across a customer who is a high or average risk, you need to understand if you are willing to take the risk of having them as a client. If you decide not to, then you need to let the customer know why you declined their credit request.
If you are looking at B2B opportunities, you can look up a business’ credit score, but this is not as highly regulated as the consumer credit scores. You should also remember that the data used for consumer credit scores is different to the data used for business credit scores.
What can be done to fix a credit score?
The first step is to get hold of your credit report. Go through the information on the report step by step. Check the contact details that are available on the report. Next, check the accounts that are on your credit report. Check if they are your accounts and do they reflect the right amount outstanding. Furthermore, make sure you are paying your accounts on time especially if you aren’t paying them through a debit order. Paying accounts on time is an important financial discipline and if you choose to pay your accounts in lump sums at irregular times this can also damage your credit score. Remember your credit reputation is based on your behaviour and having a consistent behaviour is important.
Another aspect to consider is how many different types of accounts you have. Opening a lot of different accounts in a short time has an impact on your credit score and applying for a variety of products can have a negative impact on your score.
Look at your credit report and see if there are any judgments against you. These outstanding judgements will have a material impact on your credit score.
I have a great credit score, but it has changed due to an unlawful judgement, what do I do?
After the judgment has been rescinded, the credit score will be rectified. It should be an immediate adjustment because the judgment has been cleared from your credit score.
Can you challenge information on your credit report?
Absolutely. If you see something wrong or flawed on your credit report, you must challenge it. If it is a mistake, it can be rectified and cleared, and your credit score will benefit immensely. One way of challenging something on your credit report is to go to mycreditcheck.co.za and then click on the chatbot, Eddie and you can lodge a complaint. You can also contact their call center on 0861 10 56 65 or email Experian on EZA.consumer@experian.com
What advice would you give about managing your credit score and report?
You are responsible for your credit score. It is free for consumers to access their credit score through the Experian Up website. You can download your report, interrogate it, and ensure that all the information is correct. Next, you should be disciplined about paying back the credit products you signed up for.
How does your consumer credit score impact you as a business owner?
When calculating the business credit score, credit providers will look at the principal’s information. The principal is the business owner. If your business makes less than a million rand turnover per year, the credit provider will look at your credit score as a consumer to assess whether you will get the loan or not.