Building a healthy credit profile, which affects your credit score, is vital. When attempting to access different forms of credit, regulated lenders will analyse your borrowing and repayment habits to ensure that you can timeously repay any amount that you apply to borrow.
However, it’s important to know what can and cannot affect your credit report, so that you can build your credit history with confidence. Not all service providers or contracts actually reflect on your report – meaning that if you aim to build a positive credit history, it is important to reflect on what accounts will offer you the most flexibility and can assist you in accessing money when you need to.
Before we begin, it’s important to note that while not all contracts or agreements may reflect on your credit report, it is essential to repay any debts or settle your accounts promptly. While an account in good standing may not reflect on your report, any amount that is handed over to a debt collection agency can and will affect your standing.
What is recorded in your credit report?
Your credit report is a record of your borrowing and repayment habits. Generally, it is up to a service provider’s discretion to list your account on your report – however, regulated lenders will list your applications, borrowing habits, and repayments towards outstanding debt.
Your credit card spend, as well as any personal and short-term loans, home loans (mortgages), or clothing accounts will be listed on your credit report. Your report will not only list when you applied for credit, but the total amount of money you owe, your repayments, and if you are in arrears or are in default.
Contracts and services
Certain insurance providers will elect to report your agreement to a credit bureau, meaning that you may see your long or short-term insurance contract listed on your credit report.
This is also true for certain accounts – most notably, you may notice your Telkom account listed on your credit report as well.
Judgements and defaults
It’s important to note that any judgements listed in your name in respect of money that you may owe to your creditors will be listed on your report and can seriously impact your ability to successfully apply for future funds.
Similarly, your credit report will further reflect the total amount of debt you are in, and whether you have outstanding repayments on an account. Lastly, any accounts that you are in default for will also appear on your report.
Notably, this does not include being ‘blacklisted’ from all credit providers, which technically does not occur; while certain credit providers may prevent you from borrowing from them again, the only potential way you can be prevented from accessing credit from multiple providers is if you either are found guilty of fraud or if your credit score is too low. In the case of the latter, making a concerted effort to repay your accounts can restore your credit score over a longer period of time.
What isn’t recorded in your credit report?
Personal financial information
You may be surprised to know that your credit report does not actually contain your personal financial information – namely, your income, general expenses, or your total net worth or assets.
However, regulated lenders will, by law, ask for these details when you apply for credit to ensure that you can repay the debt you intend to take on. This is called an Affordability Assessment.
Many mobile networks do not report your monthly cell phone or data contract; though they may elect to check your credit score if you apply for a new data bundle or device on contract. Further, neither your SABC TV license, nor your DSTV subscription, at the time of writing, are reported.
How to build a good credit report
It’s important to build a good credit report in order to access greater amounts of credit or more flexible terms to enable you to access finance when you need it.
Choosing credit contracts or loans that are applicable to your needs, will not overburden you financially, and which you can comfortably repay as you have promised are key lessons to apply.
Remember, although certain items may not be reflected on your credit score, falling into arrears on any account can seriously jeopardize your access to credit. For this reason, it is important to pay any outstanding debts you have timeously.