Debt Counselling & Credit Profiles

Debt counselling

When you are over-indebted you may find that you don’t have enough money to pay all your debts and other obligations. If you find yourself in this situation you should consider seeing a debt counsellor. Debt counsellors specialise in helping you to get over your debt and re-establish a good credit rating.

How does debt counselling work?

Step 1: You provide details of your income, monthly living expenses and debt commitments to the debt counsellor. You will need copies of your pay slip, ID and the latest statements of all your debts.

Step 2: The debt counsellor assesses whether you are over-indebted. If this is the case they will set up an appointment to meet with you.

Step 3: The debt counsellor will check your budget and debt repayments. They will help you draw up a new budget, cutting out luxuries. The counsellor will also tell you how much this service will cost. There is a maximum amount that the counsellor can charge. If you agree to this fee then you can officially apply for debt counselling.

Step 4: The counsellor will contact all your credit providers as well as the credit bureaus to make sure the debt figures you provided are correct. You will be registered with the credit bureaus as undergoing debt counselling. This will mean that you will not be allowed to take any more credit while you are under debt counselling.

Step 5: The counsellor will negotiate a repayment plan with your creditors. If the creditors agree then it becomes an order of the court and cannot be changed.

Step 6: You will then make one payment every month by means of a debit order to a Payment Distribution Agency who in turn pays off your debts in the instalments as agreed upon between the counsellor and the creditor.

Please note that debt counsellors ONLY work with registered financial institutions (shops, banks, registered microlenders) and not with loan sharks.

How does debt counselling work

How does debt counselling work?

Step 1: You provide details of your income, monthly living expenses and debt commitments to the debt counsellor. You will need copies of your pay slip, ID and the latest statements of all your debts.

Step 2: The debt counsellor assesses whether you are over-indebted. If this is the case they will set up an appointment to meet with you.

Step 3: The debt counsellor will check your budget and debt repayments. They will help you draw up a new budget, cutting out luxuries. The counsellor will also tell you how much this service will cost. There is a maximum amount that the counsellor can charge. If you agree to this fee then you can officially apply for debt counselling.

Step 4: The counsellor will contact all your credit providers as well as the credit bureaus to make sure the debt figures you provided are correct. You will be registered with the credit bureaus as undergoing debt counselling. This will mean that you will not be allowed to take any more credit while you are under debt counselling.

Step 5: The counsellor will negotiate a repayment plan with your creditors. If the creditors agree then it becomes an order of the court and cannot be changed.

Step 6: You will then make one payment every month by means of a debit order to a Payment Distribution Agency who in turn pays off your debts in the instalments as agreed upon between the counsellor and the creditor.

Please note that debt counsellors ONLY work with registered financial institutions (shops, banks, registered microlenders) and not with loan sharks.

#GetWageWise tip: Undergoing debt counselling will not leave a permanent mark on your credit record and your name will be cleared when you have repaid all of your outstanding debt. But remember, if you owe a lot of money it may take some time to clear your debt.

What are the pros and cons of debt counselling?

Advantages
  1. When you are in debt counselling, creditors cannot take more action against you
  2. There is no permanent record of having undergone debt counselling
  3. There is only one monthly repayment to be made
  4. Your budget will meet your basic needs (housing, clothing, transport, food) first before making provision for your debts.  You will never pay more money than you can reasonably afford
  5. A debt counsellor will suggest ways of cutting costs and saving money
  6. You will no longer get calls from your creditors demanding payment.  This will lessen your stress and allow you to focus on fixing the problem of getting out of debt.
Things to consider
  1. You are not allowed to get more credit while undergoing debt counselling
  2. It does cost a little bit of money, but the fees are set by law
  3. Your debts might take longer to pay off as a result of paying smaller amounts each month

If you would like to know more about debt counselling, you could speak to your bank or you could go to the website of the National Credit Regulator www.ncr.org.za. The telephone number of the National Credit Regulator is 0860 627 627

#GetWageWise tip: Don’t wait till your creditors (the companies you owe) take legal action. If you are struggling with repayments, contact them and ask to negotiate a payment plan. Always document the agreement in writing and keep a copy for your records.

Credit bureaus and credit profiles

Credit bureaus are custodians of credit information, which means they keep a record of how we manage our credit, if we pay on time and how much debt we have. If you have a loan, a store card or even a cellphone contract you will have a credit profile with the credit bureaus, where this information is stored.

When you apply for a loan or buy something on credit, the credit providers will review your credit profile to determine if you are eligible for credit.

What is a credit profile?

Your credit profile is a snapshot of how you manage your debt. Every time you borrow money from an institution or purchase anything on credit, it is recorded on your profile. Every time you repay on time, it is recorded. Every time you don’t make a payment on time, it is also recorded.

The credit bureaus are not the same as a blacklisting company. They place both negative and positive information on a credit report.

Take a look at this sample credit report. You can get one FREE copy of your credit report every year. You should get a copy of your credit report to check your contact details are correct and that it accurately captures how much debt you have and if you have any judgement notices, defaults and or trace alerts registered against your name.

Credit bureaus and credit profiles

Credit bureaus and credit profiles

Credit bureaus are custodians of credit information, which means they keep a record of how we manage our credit, if we pay on time and how much debt we have. If you have a loan, a store card or even a cellphone contract you will have a credit profile with the credit bureaus, where this information is stored.

When you apply for a loan or buy something on credit, the credit providers will review your credit profile to determine if you are eligible for credit.

What is a credit profile?

Your credit profile is a snapshot of how you manage your debt. Every time you borrow money from an institution or purchase anything on credit, it is recorded on your profile. Every time you repay on time, it is recorded. Every time you don’t make a payment on time, it is also recorded.

The credit bureaus are not the same as a blacklisting company. They place both negative and positive information on a credit report.

Take a look at this sample credit report. You can get one FREE copy of your credit report every year. You should get a copy of your credit report to check your contact details are correct and that it accurately captures how much debt you have and if you have any judgement notices, defaults and or trace alerts registered against your name.

#GetWageWise tip: Check your credit report every year. You can get one free credit report every year by contacting one of the main credit bureaus.

Improve your credit profile with these 6 steps:

  1. Close accounts you no longer use, this will lower your total exposure.
  2. Make sure you pay your accounts on time, every month.
  3. Pay the minimum amount indicated on your statement or more.
  4. Contact your creditors and make payment arrangements if you cannot afford the required installments.
  5. Address disputes you may have with the credit bureaus on any incorrect information that may be appearing on your credit profile.
  6. If your contact details or address changes, make your creditors aware.
Improve your credit profile with these 6 steps wagewise

Improve your credit profile with these 6 steps:

  1. Close accounts you no longer use, this will lower your total exposure.
  2. Make sure you pay your accounts on time, every month.
  3. Pay the minimum amount indicated on your statement or more.
  4. Contact your creditors and make payment arrangements if you cannot afford the required installments.
  5. Address disputes you may have with the credit bureaus on any incorrect information that may be appearing on your credit profile.
  6. If your contact details or address changes, make your creditors aware.

Worried about your credit? Avoid these habits and keep a clear credit profile:

  • Changing SIM cards in order to avoid your creditors’ calls, you will damage your credit profile.
  • Not repaying a loan and having a garnishee order issued against you will damage your credit profile.

How to challenge information on your credit report

If the information contained on your credit report is incorrect you can challenge that information. To challenge the information you can do the following:

  1. Contact at least three credit bureaus to check your credit report.
  2. If there is incorrect information on your credit report contact the credit bureau to lodge a dispute.
  3. To do this explain which information is incorrect and provide them with supporting documentation to support your claim.
  4. You will need to allow the credit bureau 30 days to respond to you
  5. In some cases you will need to contact the credit bureau and the credit provider concerned to address the issue.

Click here to download a sample letter you can use to lodge a dispute with the credit bureaus.

How to challenge information on your credit report

How to challenge information on your credit report

If the information contained on your credit report is incorrect you can challenge that information. To challenge the information you can do the following:

  1. Contact at least three credit bureaus to check your credit report.
  2. If there is incorrect information on your credit report contact the credit bureau to lodge a dispute.
  3. To do this explain which information is incorrect and provide them with supporting documentation to support your claim.
  4. You will need to allow the credit bureau 30 days to respond to you
  5. In some cases you will need to contact the credit bureau and the credit provider concerned to address the issue.

Click here to download a sample letter you can use to lodge a dispute with the credit bureaus.

Your rights under the National Credit Act

As a consumer buying on credit or borrowing money, you have the following rights:

  • Apply for credit or a loan
  • Not be discriminated against when applying for credit or a loan
  • Read and understand a credit agreement in a language of your choice
  • Have a copy of the credit agreement BEFORE taking the loan or applying for credit
  • Privacy regarding your personal information
  • Complain if you think you have been treated unfairly
  • Check your credit profile once a year
  • Choose the services of a Debt Counsellor to assist with restructuring your debt
  • Know why a loan or credit application has been rejected

 

your rights credit management wagewise

Your rights under the National Credit Act

As a consumer buying on credit or borrowing money, you have the following rights:

  • Apply for credit or a loan
  • Not be discriminated against when applying for credit or a loan
  • Read and understand a credit agreement in a language of your choice
  • Have a copy of the credit agreement BEFORE taking the loan or applying for credit
  • Privacy regarding your personal information
  • Complain if you think you have been treated unfairly
  • Check your credit profile once a year
  • Choose the services of a Debt Counsellor to assist with restructuring your debt
  • Know why a loan or credit application has been rejected

 

#GetWageWise tip: If you are feeling completely out of control, contact a registered debt counsellor for assistance, contact the National Credit Regulator to find a registered debt counsellor to help you.

Frequently asked questions

Why do credit providers use Credit Bureau’s when deciding on granting credit?

Credit providers check an individual’s credit report as this:

  • Allows credit providers to assess how the individual has repaid and managed their debt.
  • Allows the credit providers to share information on an individual’s account history.
  • Allows credit providers to quicken the process of granting credit.
  • Allows the credit providers to minimise their bad debt thus reducing the price of goods.
What if I lose my job and I am unable to pay?
When an individual completes an application form the individual agrees to abide by the terms and conditions stipulated by the credit provider, which is that they will pay the agreed amount in full and on time. If the individual has lost his/her job it is important that they inform the credit provider of their situation and try to come to an agreement on the payment. All agreements must be put in writing.

The credit provider is not obliged to change the terms of the original agreement but may do so in order to ultimately recover the full outstanding debt.

I have seen notices of companies that claim to be able to remove my name. What can these companies do for me?
These companies are known as credit repair companies. The majority of them operate illegally. Credit Bureaus do not support any of these organisations and warns consumers not to use their services. It is important to remember that there is nothing that these credit repair companies can do that you could not do for yourself. They often take large repair up-front fees and do not deliver the promised results.
What is the difference between “debt counselling“ and “ debt review”?
Debt counselling is a process which assists you in rescheduling and managing your debt. While the debt counsellor will contact your creditors, you remain responsible for your debt. Debt review is another name for debt counselling.
How does debt consolidation help me?
A debt consolidator will repay all the businesses to whom you owe money, and you will then have to repay this one company. Be aware that sometimes the interest rate for this service is often higher, meaning you will have to repay more.
Saver Waya Waya WageWise is a financial literacy initiative of the ASISA Foundation. The WageWise website was largely funded by the Sanlam Foundation.