What happens to your credit record after debt review?
The latest Consumer Credit Market Report, released by the National Credit Regulator (NCR), shows that a total of 66.04% of South African consumers seeking credit are getting rejected. This demonstrates that South Africans are clearly battling with, not only trying to make ends meet, but also, with keeping their credit records in good shape. As one of the main determinants of whether your credit application will be approved or rejected, credit records are undoubtedly the most important aspects of any credit transaction.
It is not surprising then, that when contemplating debt review as a solution to their debt problem, most people often worry about the implications that the process will have on their credit record. Before discussing the impact that the process of debt review has on your credit record, let us unpack what a credit record actually is.
What is a credit report and why is it important?
If you have ever taken up credit, whether it be a loan, a credit card, a furniture account, or even car finance, and a bond, you have probably heard about a credit report or a credit score. While your credit score is a consolidated rating of your credit worthiness, your credit report is the detailed, objective account of all your credit transactions that is used to determine the credit score. Compiled by registered credit bureaus, your credit report is regarded as the unbiased measure of your financial responsibility and can be used for various life situations, from opening up a clothing account, to buying a house, and even applying for a new job.
What happens to your credit record when you go under debt review?
When you go under debt review you are declared overindebted and flagged at the credit bureaus as a debt review client. This prohibits you from taking up any more credit as the main purpose of debt review is to help you clear existing debt. Once you complete the debt review process, a debt counsellor will issue you with a clearance certificate. This can be used to remove the debt review flag from your credit report update and have your credit score set back to zero.
How long does it take to get a debt review clearance certificate?
Debt counselling is a legal and regulated process, and therefore, like any other court case, it can only be officially closed through a legal process. After you have paid off all your debt and your debt counsellor has applied for and received your clearance certificate, they have seven days to submit it to the credit bureaus so that they can clear your record. The credit bureaus themselves also have seven days to remove the debt review flag from your record, and update on their end that your debt review case is closed. The whole process therefore should take about 21 days to complete.
Life after debt review, the window period
Once you have successfully completed your debt review programme, all the debt that has been paid via debt review should reflect “paid” on your report and your credit score should be set back to zero. The only record that should show on your credit report after your clearance certificate has been issued is your payment history which may remain on your report for up to two years. This is why it is important to still monitor your credit report for the next six months after exiting debt review. If you see any of the settled payments show up, report them to the credit bureau immediately. As one of the leading debt counselling companies, National Debt Advisors can assist consumers with navigating through this pivotal point in their financial management journey. “Through a reputable financial management system, we can help clients track their credit score throughout debit review and beyond. We offer a solution that not only keeps clients up to date on their creditworthiness but also offer useful tips on how to improve their score and financial position,” said Founder and Debt Counsellor at National Debt Advisors Sebastien Alexanderson.
Re-entering the credit market, a beginner’s guide
Due to the devastating impact of over-indebtedness on our mental health, debt counselling often comes as a lifeline at a time when you need it the most. One of the greatest gifts offered by this redemptive process is the invaluable financial management lesson that comes with it. It’s like being saved from almost drowning, and then being given free swimming lessons to take with from the whole experience. This is one of the main advantages of going through the debt review process. “As a debt review client, you emerge from the debt review process equipped with increased knowledge of the importance of healthy money habits like budgeting, saving, investing, and acquiring insurance. With these skills in place, you are now ready to start over and face the scary world of the credit market again. However, before you dive into the deep end, remember that your credit record is now down to zero, therefore you are still not ready for major credit purchases like a car or a house. So, if you want to acquire more credit, start slowly, and monitor your credit movements and their impact on your credit report,” said Alexanderson.
Contact NDA today, let us help you navigate through debt review and beyond!