What does your credit report say?

Ever wondered what’s inside your credit report, but been too nervous to look? You really should have a peek, especially now that it’s so easy for Nedbank clients who have the Money app. It’s normal to be nervous. But the best way to get over your nerves is to simply do it. The information will help you manage your debt better.

What to expect

If you’re not a Nedbank client, you are still entitled to one free credit report from a credit bureau every year. But first things first. Not all credit reports are the same. Each credit bureau has a different reporting style. You can find a list of South African credit bureaus at the Credit Bureau Association website. Choose a bureau, create an account linked to your ID number, and you’ll receive your report within minutes.

Before you try to make sense of the information, it helps to know how credit reports are used. Whenever you apply for a loan, or when you want to enter into a monthly agreement (like cellphone contracts, insurance policies and home loans), the bank will pull your report to assess if you can afford more debt (an extra monthly instalment) based on your past behaviour. And if you’ve missed your payments, your application for a new loan has a higher chance of being turned down.

You might be surprised by the level of detail in the report

Financial institutions like banks are not the only ones who will check your credit score. If you want to rent property, the landlord may also want to see if you pay your bills on time. The same goes for a potential employer. They may want to verify your credit portfolio before offering you the job. So, the point is that you shouldn’t take your credit report lightly.

Your credit score

As you can imagine, to paint a picture of millions of South African consumers through these reports would be a huge task. That is why credit bureaus use a ‘credit score’ as a high-level summary to show how good or bad you are at managing your debt. If you’ve been reading a little about finances, you already know that your credit score is a big deal. It influences your financial life to a great extent. Skip a few payments or take on too much debt and you could be stuck with black dots against your name (blacklisted) for 2 or more years.

So, what’s a good credit score? Credit scores range from 300 to 700, with anything above 600 considered a good score. There’s no need to panic if your score is below 600, although it won’t hurt to improve it. But if your score is lower than 500, it’s time to take serious action.

Personal and professional information

Although your credit score is important, it’s only a small component of your overall credit report. You might be surprised by the level of detail in the report. Information like your present and past home addresses, telephone numbers and even your employment history could be listed. So, it’s easy for future employers to see what you’ve been up to during your career.

Depending on the credit bureau, the information could go back for decades or you might see your most recent information only.

You can make adjustments or improvements only if you know where the problem lies

Double-check the information every year to make sure that it’s accurate. The last thing you need is wrong information that could affect your application to borrow money or enter into an agreement.

Your credit history

Most of your credit report will show details about your financial well-being, including your credit accounts and how often you pay your instalments. The level of detail you see will differ from one credit bureau to the other. But you should at least see which credit accounts and loans you have, showing when you’ve opened the account, how much credit you’ve been granted, and how much you’ve used. You may also see a record of your monthly payments on each account going back as far 2 years.

It’s worthwhile to check this information, especially if it shows that you’ve missed a payment that you know you have paid. Credit bureaus have a clear dispute process that enables you to submit the correct information, as well as objections or proof of payments. The most important sections to check on your credit report are those that list any judgments against you, notices of legal action, debt review and payment defaults. These are serious steps to recover unpaid accounts, and can remain on your record for 5 years – even after the issue has been resolved.

Now that you know what to expect from your credit report, you can ask for your report with confidence. You can make adjustments or improvements only if you know where the problem lies, and your credit report will help you spot it right away.