Credit checks are one of the most important financial concepts a person can ever learn.
In simple terms, what it does is check your credit and financial standing. It tells you whether you are seen by the system as a financially responsible adult or not: It can also tell you how many accounts, loans, assets, and liabilities you have to your name right now – and it can show you what things you need to fix from there.
It's obvious that you should check your own credit score from time to time. But can anyone else?
Here's what you should know about credit checks, credit scores, and when people are allowed to check yours.
What is a credit check?
A credit check is a simple financial procedure that tells you what you need to know about someone's credit score. Among other things, it can tell a person:
– Whether loans have been paid back responsibly and on time, or with a history of non-payment instead.
– Whether the person has any outstanding credit or accounts that haven't been settled.
– Whether the person has a good overall financial history or not.
Usually, credit checks are done by financial services providers (FSPs) when you've filled in a loan application and granted the company permission in order to do the credit check. Credit checks can also be done yourself to see where your finances are at right now.
Who is allowed to do a credit check and when?
Financial Services Providers are allowed to do a credit check with permission.
Financial services providers (FSPs) that are officially registered with the National Credit Regulator (or NCR) are allowed to do a credit check with the permission of the person applying for the loan.
Banks. loan providers and retailers offering store credit fall into this category: Their registration details should always be available on the NCR website if they are a legitimate and registered credit provider.
This is often in the form of a box or button that you have to click in order to say “yes” to the credit check. Other times, it can be found in the Terms & Conditions for the loan application, and you say “yes” to the credit check by signing and accepting the terms and conditions.
Employers are allowed to do a credit check with the written permission of the person they are checking.
An employer is allowed to do a credit check on a person they have hired or want to hire, but the law stipulates that the employer must have written permission from the person they want to check, and the person has to be aware of the fact that the employer intends to do this check.
Legitimate rental agencies are allowed to do a credit check, also with the written permission of the person they are looking at.
When you apply to a home rental or sale agency, you will likely be asked to submit your information (including your ID document) to the rental agency as well as fill in a basic form. Make sure that you insist on seeing terms and conditions: It's likely that this document entitles them to do a credit check as part of their screening process. For most legitimate rental and real estate agencies, a credit check with permission is standard.
Insurance companies, who are also registered FSPs, may do a credit check with permission.
Most insurance companies are allowed to do a credit check at any point, but only with the permission of the person, they are checking. Read the terms and conditions of your insurance carefully if you don't remember specifically consenting to a credit check: You likely said yes to it here.
Debt counselors are also registered FSPs who are allowed to check with permission.
The majority of debt rescue companies and debt counselors are also allowed to check credit scores because of the fact that they have to be registered FSPs in order to operate. Again, you'll be asked to submit information like your ID document and consent to a credit check beforehand.
SAPS investigators can check credit scores under certain circumstances.
Under some circumstances, SAPS investigators might be allowed to check a person's credit score or credit report when it forms part of the investigation of a case.
Who is not allowed to check my credit score?
Anyone who does not have permission or legal standing to do so is not allowed to check your credit score.
This includes any person or company who doesn't have your written permission (or acceptance of terms and conditions) in order to prove that you (1) knew the credit check was going to be done, (2) consented – or said yes – to the credit check.
It might include a prospective landlord or current landlord who didn't ask to run your information; it can also include any “loan sharks” who insist on running personal information without permission.
The simple rule is: If they didn't ask you, they're not allowed to check.
Where can I see the National Credit Act?
The National Credit Act (No. 34 of 2005) is the single most important document you should read if you want to know more about credit or loans and what the law has to say.
The NCA says what laws and clauses apply when you take out a loan, what happens when you pay it back, and what your rights and responsibilities are as a user of credit in the country. The same law also outlines what credit providers are allowed to do (or not) according to the law. Know your rights when it comes to credit.
The full act is available as a downloadable PDF on the official Department of Justice website