what you will learn in this webinar
Justin Harrison 00:06
You’ve posted on the Facebook page, yeah?
David Bester 00:07
Justin Harrison 00:08
David Bester 00:10
Sending out WhatsApp notifications.
Justin Harrison 00:16
Just give everyone a chance to get on; we’re about four minutes earlier than planned but it’s cool because it gives everyone a chance to get on. I can't get over how cold it is.
David Bester 00:34
Ja, I must say, it’s pretty nice here in Cape Town.
Justin Harrison 00:38
Hey listen, it’s not often, where I am, you get five degrees. When five degrees is out, I start wanting to immigrate.
David Bester 00:46
Ja, well that is cold for Durban.
Justin Harrison 00:49
No, it’s very cold hey. Good morning, if you joining us. Hope you've got a cup of coffee, notepad, pen; we'll be going live with a webinar shortly. Dawie and I are just basically sending out messages to all the WhatsApp groups. We've got about eight or nine WhatsApp groups. There's actually a limit of how many people can join a WhatsApp group, so we only figured that out later. There’s, I think, 257 people so, we've got a bunch of WhatsApp groups we're getting the messages out to. So, while Dawie’s just busy sending those messages out and we’re just making the announcement on our Facebook page. If you are just joining us, please say hello in the comment section. Let us know where you're from. Let us know if you’re as cold as we are. Dawie is in Cape Town and I’m in Durban and thanks to the power of technology, we’re all sitting here together, which is really cool. So ja, introduce yourself in the comment section. Let us know if there are any specific questions you've got, with regards to your credit profile, your credit report. We will do our level best to try and answer every single question that comes through. If we don't get a chance to answer it, we will still look at them and use those comments and questions to build future webinars. So, please by all means, if you have questions, just drop them in the comments box.
So, Sifiso: “Hello, from Bloemfontein” – that must be cold. I can only imagine, Bloemfontein must be one of the coldest places in the country right now [inaudible] Tumelo from Bethlehem: Actually, Bethlehem is probably colder than Bloem; Shelley Beach; Joburg. Bongiwe from Kokstad – oooh, Kokstad must be cold. Kokstad in KZN is one of the places that I avoid in winter, I must tell you. We've got people from Benoni, Pretoria, a couple of people from Cape Town.
So, welcome guys. While we're just giving everyone a chance to get on; we'll be going live with a webinar in the next couple of minutes. Please, if you haven't subscribed to our channel, please do subscribe to our channel, click on the subscribe button and make sure that you subscribe to our channel, so whenever we do post videos and updates, that you guys can be notified. Also, it really does help us get our message out. The more people subscribe to our channel, the more our content gets ranked on YouTube. And it helps us get some very, very important information out to consumers in South Africa. Dawie and I set about this mission, at the beginning of this year, to really focus very heavily on the educational side of things, in terms of people's credit reports and really bring a very holistic view of the credit reporting industry back to the consumer. So, we really want to get this information out there, we want to help people, we want to share this information. And having been in the business for eight years, we really have a lot of valuable insights, as to how you can improve your credit score, and how to improve your financial standing in general.
David Bester 04:14
Yes. If your connection drops out, hopefully, mine will work today. Two weeks ago, I had a few connection problems but that's what happens with technology every now and again, so, I apologise for that. Hopefully this time, I’m on a fibre line, so it won't happen again. But if by anyway you drop out, your connection or you have to go to work, we will send replays out to this chat as well. So, don't leave the WhatsApp group after the webinar. We're going to be using it in the future to also notify you of all the other webinars that we'll be hosting. And, we’ll also post the replays of the webinars, where you can also download the slides of the webinar if you want to reference them back.
Justin Harrison 4:57
Ja. If you're waiting, I'm just going to flash a couple of the comments up on the screen. People from Bethlehem, saying it's freezing. We've got people from Pretoria; Lusikisiki – that must be absolutely frigid there. We've got someone from Oranjeville and then, while we're here, we'll quickly address this question from Elizabeth in Bloemfontein: you’re wanting to know how to improve your credit score. Well, we actually did a webinar on this about, I think four weeks ago, I stand corrected. Please go back to the channel, you'll see there's a video there, ‘How to improve your credit score’. What we do is, record these sessions and we do post them back on the YouTube channel, so people can go back and view them at a later stage as they choose. And also, to provide this content for people who weren't able to make the webinars. So, if you're looking to improve your credit score and you want to know what the key things are that you can do, just go to our channel and have a look through the videos and you'll see there is a video there. It was quite a long video but some really, really good content.
David Bester 06:13
Yes. There was two. One was: ‘How to increase your score’, in general, and then there was another one: ‘How to quickly increase your credit score’. So, it’s two different subjects. The one is, ‘quickly’ but obviously, you need to have access to certain facilities like credit cards. And then the other one was a very general way of increasing your credit score, by using different tips. And that is exactly why we are hosting these webinars, is to educate people because to put it simply, there is no right or wrong answer. Everyone's needs are different from each other. My credit score is completely different from Justin, so what will work for me, might not be the best thing for him. So, it's important to look at your credit report and look at tips we are giving in the webinars and reference back to them and then apply it to your own credit profile.
Justin Harrison 07:02
Ja, absolutely. I think, like in my instance, Dawie, maybe I'll just quickly give an example there. I pulled my report about a week ago, again. I pull it every month and… Dawie, can you remember what was my score? 644 or 684, I can’t remember.
David Bester 07:24
Justin Harrison 07:29
It was pretty high. And it's pretty difficult for me to improve my score anymore unless I start taking on debt because I don't really use my credit cards. I don't really have any major finance.
And so, one of the ways to improve your credit score is to access finance and use it responsibly. If you go back and check the other video, you'll see all the things that we advise on how to use your credit facilities in order to increase your score. But in my instance, I don't have any debt, so my credit score is fairly high but I'm probably not going to get it much higher than it already is. Purely based on the fact that I actually don't lend. And whereas somebody else, on the other hand, might be lending but they might have a slightly higher credit score than me. So, what Dawie is saying, is absolutely true. It really comes down to your individual situation. You need to understand what is happening with your financial picture. So, these webinars that we're giving are really just a very broad spectrum on the things that you can apply, to improve your credit score and if you do go and do these things, slowly and systematically, you will see an improvement in your score.
David Bester 08:49
Yes. So that being said, shall we get started? Okay, so what we'll cover today: ‘How your credit score is calculated’. You need to know exactly how your credit score is calculated because that makes it so much easier for you to improve your score. If you know what factors count towards your credit score, then you know exactly what to fix. It's all good and well, you look at your credit score and say, Okay, I'm only going to address my previous addresses or my previous employment section. You will find that it doesn't make such a big difference in your credit score, surprisingly. So, it's very important to understand exactly what the credit bureaus use, in order to calculate your credit score. It's actually very simple and I don't think this webinar is going to be very long because it is very simple to understand your credit report, once you know how it's calculated and what to look at. We're going to show you exactly: ‘What matters on your credit report’. We're going to show you: ‘Where to look for errors’ because like we discussed in our previous webinars, according to news sources, almost 80% of the people have errors on their credit report. And a lot of the times, these can very negatively affect you. 25% of these errors are actually negative things on your report. So, if you don't need to have errors, then you shouldn’t have them. Simple as that. We're also going to show you: ‘What sections on your report you need to give attention to’. And then finally, please stay updated. As we said, there's a lot of info we need to cover; we can't cover everything in one webinar, so, click on the subscribe button on this channel. You will see the subscribe button if you're on your mobile device by exiting the comments; you can do it after the webinar if you want. And then, just clicking on the red subscribe button there. This will allow us to update you in the future if there are new webinars coming out. Anything you want to add to Justin?
Justin Harrison 10:45
No, I think you'll probably touch on this in the points later but one thing I really want to say, that people need to pay attention to. One of the best ways to improve your credit score is just to go and correct errors. 80% of people have errors on their reports. So, whilst it's all good and well, being financially responsible and taking all the right steps in terms of managing your money, you also need to manage your profile, which is why we recommend you have a monthly subscription with one of the services out there. Whether you choose us or somebody else, that's entirely your choice but it's important to actually go and check your score regularly because if I can tell you, the one place where people are letting themselves down, in terms of their score, it's inaccurate information.
David Bester 11:35
Yes, and if you don't believe me, just do a Google search on identity theft and you'll see how much identity theft is going on at the moment, in South Africa. It's an astronomical amount; it's increasing every month. So, it is definitely one of the only reasons, you can actually find out or combat identity theft is by checking your credit score every month or on a regular basis and picking those things up before they harm your score. So, the first thing that you'll see, when you pull up a credit report is your credit score, right. That is a number and I've got an example here. This is one of our new designs, we will be going live with this design in the next, probably week or two, Justin? But I've used this as the demo for today. So, you will see, just below that, the different credit score ranges, and that is the most important thing for you, as a consumer, to look at because that'll show you exactly what your chances are when it comes to applying for finance. And the reason why most people are getting or pulling their credit reports is to apply for some kind of finance, which is a home loan or vehicle finance or personal loan, whatever it might be. Now, you will see… Every credit bureau uses a different calculation to calculate a credit score; not necessarily a different calculation but they’ve got different credit score ranges, but all of them have different classes that they fall into, and that is the important part you need to look at here. So, you will see on My Credit Status, we use the data from Experian. I know there's a few other people, other bureaus, or credit bureau resellers, that also uses Experian. You can go look them up or just simply send them a message and ask them which credit bureaus will they use. It’s either going to be TransUnion, Experian, or XDS. Now, with us, we use Experian, and the credit reports that we use, or the scores that we use, go from zero to 705. A lot of other bureaus go up to 1000 - from zero to 1000 – so, it's very important to know exactly where, in that range, you fall or which bureau’s scores gets used, in this instance. You will see underneath this credit score here, which is 479, which is a very bad credit score. You will see there is zero to 527, that's very poor. And then 528 to 602 is poor; 603 to 649, is fair and so it goes on. The most important part is, you can generally get finance when you have a fair credit score, a good credit score or an excellent credit score. That is the main thing you want to look at. You want to make sure that you either fall into good or excellent. You still have a chance of getting finance to approve if you've got a fair credit score, but that depends on your relationship with the lender and what you want to use or what you want to apply for. For instance, it's easier to get a personal loan, than to qualify for a bond, because it’s too…
Justin Harrison 14:36
Ja, Dawie, there are also some important points we need to make on the score ranges. Even though the score ranges may differ from one bureau to the next, what is important is the general marker that you fall in. So, do you fall in good; do you fall in poor; do you fall in fair or do you fall in excellent? Regardless of how the range has calculated the actual number of points, what really is important is, where the needle falls. In other words, which range are you in. And something that’s really important to understand is, having a good or a fair credit report, shouldn't put you in a place of complacency because here's the thing: the higher your score, the better you are rated, the lower your cost of finance, right. You basically get, what I call, finance privileges, for having a better score. And so, what you want to do is, you want to absolutely make sure that you have the highest possible credit score. If you see that you come on board and you take a report and you see that your score is good and it's not excellent, don't be complacent about it. Go and work on your profile because you can access better deals at better rates.
David Bester 15:47
Yes. If you apply for a bond and you get a 2% better interest rate, than someone with a good credit score, for instance, the amount that you're going to be paying over the long-term is astronomical. You're going to be saving, probably, up to millions, depending on the amount of the bond you take. So, it's really important, like Justin said, you want to reach for excellent status and not simply just for the fair or good brackets. But generally speaking, this is what you need to look at. It doesn't matter where you take your credit score from, where you pull your credit report from, you're going to be seeing this from most of them, which is just a general range, like Justin says, where the needle falls and in what credit score range you fall.
Justin Harrison 16:29
And what's also really important to note is, that even though TransUnion might have a slightly different report, to let’s say XDS, and XDS might have a slightly different report to us, know that the data, all come from a central location. There is an institution called SACRRA, and SACRRA is reciprocity for all the data in the country, and the credit bureaus all have to share each other's data. So, whether you get a report from Experian or whether you get it from TransUnion or whether you get it from XDS or whether you get it from us, fundamentally, the data is the same. You may find one or two listings that are slightly different between them and that's purely because systems need to update and they haven’t aggregated the data yet, but the reality of it is, it's all the same data. Don't get too buzzed out about that sort of thing. Look at where your score range falls, look at your needle and then make your decisions on the actions that you need to take, based on that.
David Bester 17:29
Yes. To add to that: while the credit score might be different on the different bureaus, this credit score range that you fall into will fundamentally be the same.
Justin Harrison 17:38
David Bester 17:40
So, “How your credit score is calculated”: Payment History (40%); amount owed (30%); length of credit history (20%), and new credit inquiries (10%), and we'll go into detail on each of these. A lot has changed in the last while. It used to be about: payment history used to be 35% but the credit score or the credit bureaus have changed. I know in the US, they still use the older model, as far as I know, of 35%. And up to a few years back, it was the same in South Africa but South Africa has recently changed. No one knows the exact credit score or the credit. What do you call it again, Justin?
Justin Harrison 18:26
Nobody really knows how each credit bureau runs their algorithm, in terms of scoring things but what is important here, Dawie, what people need to know and need to understand, is the priority of things. I’m sure you're going to make your points on this but I just want to add quickly, that first of all, make sure that you have a very good payment history. Payment history means paying your bills on time, paying the maximum amounts due, just basically showing that you’re a very responsible consumer and that you are the kind of person that institutions would want to lend money to. So, the way you repay your loans is absolutely critical. Then we talk about the amounts owed, and this is something that is often overlooked. People think it's the total volume of your debt. It actually isn't the total volume of your debt. It’s a combination of two things: it's a combination of your debt versus your income ratio. So, that's one calculation that’s taken into account, and the other is how much debt utilisation you actually take on. For example, a good range is actually about 30%. So, if you have got a R100,000 facility, ideally, you should only be revolving in about 30,000. So, you should only use about 30,000 of the available facility. So, number one: your payment history; number two: making sure you're responsible in your borrowing and you're not just maxing out your cards, maxing out your loans. And then, as Dawie’s put here on the screen is the length of your credit history. So, the longer you have a credit history, the better your score is going to be. The reason why this is slightly lower than all the rest is that you've got to get the new lenders as a chance to get into the market. That's why it only accounts for 20% of the score but it's still very important. The longer you can maintain good relationships, the longer you can maintain a good financial track record, the higher your score is going to be. And then the last one which I think is really critical to understand is new credit inquiries and inquiries in general. So, if you want to go rent a property, chances are, they're going to do a credit check on you. If you go for certain jobs, they're going to do a credit check on you. If you're looking to take on loans, obviously, they're going to do a credit check on you. So, what the system, the algorithm doesn't want to see, it doesn't want to see an overwhelming amount of inquiries coming through because what that indicates is irresponsible lending. It means that you're applying for loans all over the show. It means that there's a lot of activity, in terms of inquiries, so you want to just keep those inquiries to as much of a minimum as possible. Obviously, when you create your own profile and stuff, that’s entirely different. We're talking about third parties coming on and actually doing an inquiry. There’s what we call a ‘hard inquiry and a ‘soft inquiry. A hard inquiry is typically done by institutions or people who are wanting to loan you money or you’re going to sign a contract with them. So, that’s a hard inquiry and that it goes on your report. It shows that somebody looked in your credit profile. Soft inquiries are general inquiries that you do yourself. So, you’ll go onto a site like ours, like My Credit Status and you’ll pull a credit report. That's considered a soft inquiry and it doesn't go on your status; it doesn't affect your score.
David Bester 21:38
Yes, so we'll go into detail on each section now. Justin’s given a good rundown on all of them, but the word that I was looking for, was the scorecard. Every bureau has a different scorecard. No one knows exactly what that scorecard is because that is the credit bureaus IP, so, they obviously protect that but we've got a fairly certain understanding of how the credit scores work, and this is how it's calculated. Now, why am I showing you this? The whole webinar is about how to read your credit score. Well, it's very simple. If you don't know how it's calculated, you don't know which sections to look at, and how to improve it. So, that is exactly why I'm showing you this, is so you can understand which sections you need to look at and what actually makes up your credit score. So, let's talk about payment history, which is 40%. That is a massive amount; almost half of your credit score is calculated because of your payment history. Now, the payment history shows the lenders, how good you are with repaying debts, and how you can manage your debt. If you can't manage your debt and you don't make your payments on time, then it means that you are irresponsible and they wouldn't want to lend you money. Think about it this way: let's say, a friend comes up to you and asks you to loan him some money, but you know for a fact, that he's loaned money from all of your friends, and he hasn’t repaid any of it. You're going to, most likely, not want to loan him money because you know he's not going to want to pay it back to you. And that is exactly what these lenders are looking at and why the payment history is so important. It’s the most important factor on your credit report, so make sure that all your payments are made on time, and I'm going to show you an example, pretty soon as well, on the next slide. It’s very important to make sure that you never fall behind on any payments, and if you do see that you're going to fall behind, negotiate with your creditors. Two weeks ago, we did a webinar about that. If you'd like to learn more about how to negotiate with your creditors, then just go and reference back to that one, to see exactly how you can negotiate your creditors, to make sure that these things don't pop up your credit report, because they are really bad, when it comes to your payments profile and your overall credit score. Anything you want to add there, Justin?
Justin Harrison 23:54
No. You’ve pretty much covered it.
David Bester 23:57
Okay, so here's an example. If you pull a report from My Credit Status or wherever you want to pull a credit report from, this is what your payment history is going to look at. And like I said, this is the most important part of your credit score. Let's take this one. You'll see the first one is Nedcard; that’s a credit card from Nedbank. Now, this person has been behind on his payments for 150+. The 150+ in a red there means that he is behind 150+ days on this credit report. Those are the things you want to avoid. You never want to see any red numbers on it because that means that you are behind. What you want to look for, is the ‘okay’ sign here, which is the second one, the Bayport Financial Services one. This means that the guy has been on time with his payments, and he's made all his payments to Bayport. What's also really important to note, is that even though you might come back on terms with your credit card and you run into some money and you start paying your accounts again and catch up. It's going to show on your credit report, but your previous history is also going to show your credit report. So, it's going to show that you were behind on your payments, even though you have paid it up now, and it's going to negatively affect it. That's why I say, it's so important to make sure that you make your payments on time and never fall behind. There are ways that you can negotiate with your creditors, once again, reference back to the previous webinar where you can negotiate with your creditors, if you have those negative things on there.
Justin Harrison 25:32
Ja, just one thing to add, is that people need to understand, it's very difficult to erase a bad record. It's basically time; it’s no different than a criminal record, actually. You need to go through a certain period of time until that information falls off your report. For example, we look at the bureaus and there may be, for example, 12 months of history. Essentially, you have to go through a 12-month cycle in a new payment profile, to basically expunge the current data of your record. And even then, it's still counting to you, in some way. I cannot stress this highly enough. You need to make sure you're up to date with payments, number one. Number two: if you have caught up on payments. What I would do, in that instance, if you've been behind on payments, is try to get them to update your payment history. I'm not saying that your creditors will do that but there is a chance, if you ask you, that they might because it is affecting your score. So, just keep that in mind. And if you have been irresponsible with your payments, in terms of what the system sees, the onus is on you to go and fix it.
David Bester 26:43
Yes, as I said, this is 40% of your credit report. If you get one section like this sorted out in your credit report. Obviously, you need to fix it but that fix alone can generate up to 100 extra points for you on your credit report, which is massive like you can see. What I suggest you do, if you have fallen behind on your payments, and if you do have some cash, you now have leeway to go to creditors and negotiate with them or negotiate a settlement. Tell them, “Listen here, I will pay you the full amount if you just update this on my credit report and delete or remove all the negative months or the months behind and make it paid up. So, that is something you can do but once again, reference back to the previous webinars, where we've discussed that in more detail.
So, amounts owed: that is how much of your credit you are actually using. On one of the previous webinars, I think it was, “7 ways to increase your score quickly”, there we actually showed you that one of the easiest ways, apart from getting your errors fixed, is to make sure you use 30% or less of your credit. Now, your credit utilisation is the total amount of debt you have and then, what percentage of that debt you're actually using. Let's assume you've got a R1,000 limit on your credit card that you can use and that is the only line of debt you've got at the moment, or both credit cards together, you have R1,000 debt, right. Now, if you're using R100 of that debt, every month, then it means, you are using 10% of the total amount owed, because you've got the R1,000 limit, and you're only using 100.
Justin Harrison 28:30
Dawie, what also is a really good tip is that a lot of people, when they take on a facility, like a credit card or a personal loan or whatever, they always think of the amount that they need. Let’s say the amount they need is 50,000 then they go and take a loan of 50,000. My advice is, always go and take a loan of more, so that you have the facility, but don't use the facility. Only use the 50,000 that you need because when you're going and you're applying for 50 and you use 50, you basically have a credit utilisation of 100% and that massively impacts your score.
David Bester 29:09
Yes. The lenders, basically, see this as the ultimate test. They test you on how well you manage your debt because they know that if you are responsible and only use 30%, then it means that you're responsible with your date and you're most likely going to repay your debt. You need to remember that a lender only looks at a credit score because they want to know the likelihood of you repaying your debt to them. Once you understand that, it’s very easy to understand how you should calculate your credit score, or what actions you should take on your credit report or payment profile, in order to increase your credit score. What I mentioned also, in one of my previous webinars, if you use more than 30% of your utilisation ratio, probably, the easiest way to fix that is, to increase your debt or increase your facility.
Justin Harrison 29:57
Increase your available facility, absolutely.
David Bester 30:01
That's actually something I did. I just went to my credit card company, FNB. I just told them, actually, when you log into FNB, you can do it automatically. They tell you; do you want to raise your limit to X amount? And I just did that. Now, I’m only using about 10 - 20% of my credit utilisation every month. I've got an excellent credit score and that is actually the only line of debt I have. So, it shows you, you don’t need multiple lines of debt in order to get a great credit score. You can have one of them but if it shows, and if you show that you're responsible for it, then you can still get an excellent credit score, even with only one account. Like I’ve discussed as well, it should be below 30%. Pretty ironic that your credit utilisation should be around or less than 30%, and it counts to about 30% of your credit score. It's one of the easiest ways to increase your credit score. The first one is fixing your errors because if it's an error, you can immediately remove it from your credit report. The place that you look at for errors is the amounts owed because this accounts for a lot of your credit score. Make sure that the amounts are correct on your credit report, and then also look at your payment profile. Make sure other payments don't show up there. Only the payments that you have made should be showing up there. And apart from that, any other error, you should get fixed on your credit report as well, because it's your right to have correct information on your credit report. The length of credit history: that's also very important. If you only have an account of three months old, it's most likely going to negatively affect your credit score because at that point in time, you haven't really shown any responsibility and you haven't shown that you can repay your credit and your debt on time. It only accounts for about 20%, but it is still important. Usually, what creditors like to see is, if you have an account, up to or at least five years old. That counts a lot so, what this says is, how long your accounts have been opened; this is what they look at. For the first six months, you actually get penalised, believe it or not. Let's assume you want to take out debt now. I noticed there was someone that asked a question here. She said that they don't have any debt, so what should they do now? Well, if you don't want to apply for any finance in the short term, and even if you can't get financed, then the obvious thing to do is, get some debts. You can do a credit card, it's probably the easiest thing to get, but you need to remember that for the first six months, you're going to see about a 10% reduction in your credit score. Now, as you show responsibility and you show you are responsible for your payments; you pay accounts on time. Gradually, over six months, your credit score is going to climb, and it's going to increase and then after about a year or two years or three years, it's going to account for quite a hefty bit on your credit score. This is something else: if you've got old accounts. Many people like to close their accounts, actually, if you close your account, it's only going to decrease your credit scores. It's going to be negatively affecting your credit score. If you've got old accounts or credit cards that you aren't using, don't just close them. Leave them idle, use them every now and again because they actually do a lot of good to your credit score, believe it or not. As long as you can show that you're responsible for it. Anything you'd like to add there, Justin?
Justin Harrison 33:45
Ja, Dawie, I’m just sitting here, having a quiet chuckle to myself because I'm sure many of the listeners on the webinar can hear that you're Afrikaans. So, I just want to quickly intervene and do a small correction. When Dawie says that you should take on debt – I just want to correct the phrasing a bit more for English listeners, who probably wouldn't understand exactly what you’re saying. What we’re specifically saying is your “facility”, your “access to debt”. We're not saying, actually, go out and make more debt. What we're saying is, keep facilities open; what we're saying is, have facilities, have credit facilities. We are by no means advocating going and making it debt. If there's one thing I can attest and my report is probably very different from everybody else's, in that I don't have debt. I have a very good credit score, probably one of the best credit scores around and I don't have debt. So, we're not saying go and make debt just for the sake of increasing your credit score. What are we saying is, go and have a facility available. Dawie and I have discussed this in one of the other webinars that we did. We said, you can, for example, have a credit card with your bank, and you can have money coming in. What you can do, is you get 30 days interest-free on your credit card. Use that credit card to go and do your monthly shopping, fill up your car with petrol, all the normal things, and then just transfer the money before the 30 days from your cheque card into your credit card. So, you haven't incurred any interest but what you've done is you utilised the facility. You haven't made debt; you've just used to utilise the facility. I just want to make sure; we're not getting anybody's wires crossed here and people think we’re going and saying this and advocating go and make debt. We’re not saying that. What we're saying is, have the facilities available. And, like Dawie is saying, sometimes closing some of your facilities can really have a very negative impact on your score and sometimes it pays you to have those facilities open. Like credit cards, for example, a lot of people don't know, putting a little bit of money in your credit card actually gets you a really good interest rate. So, even if you don't want to use the facility on the credit card, you can put money into the card and just keep it open, for the sake of having that account open, and you'll get a decent interest rate on it.
David Bester 36:13
I think it's a really nice way of saying it, is calling it “facilities” instead. Obviously, it's not a good thing if you go and make debt, there are certain debts that you’re going to make during a lifetime - a home loan, for instance, because it's a pretty large purchase, right. Now, something like that, as I said, in the short-term, will be negative but in the long term, it will be positive. But yes, by no means are we advocating to go make debt. If you're exploring the options of personal loans and microloans, then you're heading into dangerous territory because you're already looking for ways to improve your financial status but, it's probably not the correct way of doing it. It most probably, can put you in a lot of harm and also negatively affect your credit score in the long term. So, yes, rather look at the facilities, if you want to increase your credit score, instead of making bad debt. Apart from that, a personal loan and microloan also have astronomically high-interest rates, which means that you’re going to be paying a lot more than you should be. So, then the last one is new credit and inquiries: now, this only shows that the amount of credit that you applied for. Lenders don't want to see that you’ve applied for a lot of credit, in a short amount of time because it means that you're desperate, and you're looking for different ways of applying for credit, which means that you're, at the moment, not very responsible with your money. Don’t apply for new credit frequently. Aim for soft inquiries, as Justin said, and not hard inquiries. A soft inquiry is, let's assume you want to apply for a home loan, right. Now, you want to get a pre-approval. What this will do is, you will apply for approval pre-approval first. They'll do a soft inquiry on you. The lender will go and access your credit score from the credit bureau, but they won't pull your full credit profile. They will only look for the credit score range, which is ‘very bad’, ‘bad’, ‘average’, ‘good’ and ‘excellent. And let's assume they get an ‘excellent’ credit score on your name. What they will then go and do, is they’ll pull the full credit report to see exactly what your payment profile is and what your credit score is. That is called a hard inquiry. Now, if you're only looking into your credit report yourself, let's say from My Credit Status, that's called a soft inquiry, and that will not even show up on your credit report. Now, soft inquiries don’t show up on your credit report; hard inquiries do show up on your credit report. You don't want to see a lot of hard inquiries on your credit report. Here's an example of hard inquiries. As you can see, this person wasn't very responsible, he did a lot of inquiries in a very short space of time, so this will negatively affect it but it won't have such a big impact because it only accounts for 10%. That's why I say, it's so important to understand which sections on your credit report you need to look at, but it's like I said, don't apply for a lot of inquiries, because it is negatively going to affect you as well.
So, in summary:
- Always make sure that your accounts are on time and paid-up;
- Use 30% or less of the credit utilisation ratio – remember, that's one of the easiest ways to fix or increase your score if you want to get a great credit score;
- Don’t apply for credit often.
- Make sure to check your report monthly - the reason why we say that is, to make sure that no one else accesses your identity and applies for an account and negatively affects your credit score. It's very difficult to start fixing it once it's been done. If you check your credit report monthly, then you shouldn't have any issues because you will pick it up before it really becomes a problem.
And that is it.
Justin Harrison 40:21
Okay, Dawie, we’ve got about five- or 10-minutes left. I think we can just address a couple of the questions here in the comments. Guys, if you've got questions, please drop them in the comments section now, for the next five or 10 minutes we'll sit online here and just quickly go through them and answer. I'm going to flash a few up on the screen and we can just tackle them one by one. Somebody asking if TransUnion’s offices are open. Yes, they should be open; just go to the website, go to the contact section and contact them from there. Shaida asks: “How long does it take to remove a debt review your name?” Okay, Dawie do you want to take this?
David Bester 41:02
Yes. If you are under debt review or debt restructuring, that means you're going to have a credit score of zero. So, please do not go for debt review; there are other ways of fixing your credit score, there are other ways of dealing with your debt. Go look at our previous webinars on how to negotiate with your creditors, be responsible, cut back on your lifestyle, set up a budget, and rather deal with your debt yourself. The moment you go into debt review, you are going to take your credit score from whatever it was and pull it back to zero. So, by all means, avoid debt review; do not go under debt review and even if you are done with your debt review - you have paid up all your accounts and everything is up to date – that debt review is still going to be on your name for five years. It's negatively going to affect you for five years.
Justin Harrison 41:50
Ja, so to answer your question, Shaida: Five years for it to fall off your profile. The next question comes from Sfundo, who said: “I have a credit card with a limit of R35k, and I paid R5k last month, taking the limit to R8k. How long will it take for that to show my report?” Okay, so, Sfundo, there are two things we need to address here. Number one: there is no hard and fast rule as to how long it will take to affect your score. It could take some time, it may not affect your score at all, depending on a lot of other things happening within your profile. For example, you might have a poor payment history. So, just doing this one thing alone, with not knowing the entire picture, is very hard for us to answer. But what I will say to you is, if within, sort of, two months, your payment profile hasn't been updated on your credit profile, then what I suggest you do is that you log a complaint or an inquiry, should I say, with the credit card company first. If you're not making any progress there, then go to the bureau and go and mark it as an incorrect listing or adverse listing, provide proof of payment, and they have to act that within 20-days. If they don't, then automatically they're obligated to go and correct that, provided you have the proof.
David Bester 43:14
Something to remember, it can take up to 60 days to show up on your report. that actually.
Justin Harrison 43:19
Ja, absolutely. I’m just quickly going through some of these: Celeste said: “Me and my husband had bad credit reports and we wanted to take a home loan and were advised to fix our credit records. However, we paid some accounts, and others were prescribed and we couldn’t pay them.” Right, now prescribed debt is an interesting one. Essentially, South Africa has a that’s come about in the last few years. If the debt is older than a certain period of time and the creditors have not been able to collect on that debt after a certain period of time, it becomes prescribed. Now, prescribed means that the debt is essentially written off. The problem with prescribed debt is, they’re often sold off to debt collection agencies, so, that's something you need to be aware of. My strongest advice is to go and log a complaint with one of the credit bureaus; you can do it through our website if you're a member. And basically, just go and show that the debt has been prescribed and request for it to be removed from your profile.
David Bester 44:29
She does have a follow-up question there. Okay, there you go. “…Now we did not have any debts but our scores are still poor… what can we do to improve them?” Firstly, as Justin said, if it's prescribed debt, you need to have it removed from your credit report. If you can prove that it's prescribed debt, then just log a dispute, send it to the credit bureau. You can look at the webinar that we did two weeks ago; we showed you how to raise a dispute. I would first do that. And then, I would follow all the webinars that we've been doing; we show you exactly how to increase your credit score. Just follow some of the tips and you'll be good to go in the next few months.
Justin Harrison 45:08
Okay, so Portia said: “I received a call in April from DebtBusters, in May my credit report showed I am on debt review. How can I rectify this as it is bad on my credit report?” Well, Portia, first of all, you need to clarify, did you actually put yourself under debt review? And if you did, refer to the comments Dawie and I made earlier about being under debt review. It’s always better to handle these things yourself, where you can, if possible, and if you have handed over, all is not lost. You still have the ability to remove your debt review. If you can, make a case for yourself and prove that you are able to service your debt and enter into agreements with your creditors, on your own. Then there's certainly no reason for you to go and pull back from the debt review and start managing things yourself. Dawie, is there anything you want to add to that?
David Bester 46:01
No. I think you’ve covered it.
Justin Harrison 46:04
Okay. Then, from Sfundo saying: “Does decreasing your credit limit have a bad impact on your credit score?” Dawie, I’ll let you answer that.
David Bester 46:16
No, absolutely not. Like we said, increasing your credit limit is actually good for you because now you can use more of your credit and have a lower utilisation ratio, but if you're not disciplined and you can't manage your finances properly, yes, it’s very bad for you.
Justin Harrison 46:37
The next one comes from France. France asked: “I once enquired about debt review but didn't go through with it. Later on, I was told I’m under debt review when I try applying for credit. How does that happen?” Well France, if you didn't specifically authorise yourself to go under debt review, there is no way that you can be under debt review, unless you signed something, without knowing that you’ve signed it. My advice is, to go to the company that has you under debt review and is managing your debt, according to the report, contact them and ask for proof, that you specifically authorised to go under debt review. If the case is that you didn't authorise it or there’s any kind of situation that’s come about where they’ve mistakenly put you in there, my first call would be to the NCR - the National Credit Regulator and go and lay a complaint against the company. No company can put you under debt review without your express permission to do so. Dawie, anything you want to add there?
David Bester 47:38
Yes, to put it very simply, if there's anything on your credit report, that you have no record of authorising, then it can be removed. It's as simple as going to the credit bureau, asking them to prove that you actually applied for this or for this facility or whatever it might be if it’s debt review, whatever it is. If they cannot prove it, it has to be removed. That is the law.
Justin Harrison 48:06
Absolutely. And Dawie, we will take the last question here quickly because we're running out of time. Ammu says: “I have paid up all my old credit. Now, I don’t qualify for new credit because I don't currently have an active account. It’s been 8 months now and my credit score is still low.” Okay, Dawie, do you want to handle that?
David Bester 48:26
So, the first thing is, you have paid up all your old credit accounts. Like we showed you, in that previous slide, your history still shows up. Now, you don't have any current accounts, which shows that you are not responsible, or there's no way to show that you're responsible, but your previous accounts tell me, that you did fall behind on some payments because you said, “it’s paid-up”. Now, that is the biggest problem you’ve got there. Your history shows that you are not a great player, even though you've paid up your accounts but now, this is also no record showing that you are now, a responsible player. So, I'd like to refer back to what Justin said earlier, rather try and get those facilities to help you improve and show that you are responsible with your credit now.
Justin Harrison 49:11
Absolutely. Ja, guys, I think that's pretty much it for today's webinar. I just want to thank everybody for their positive feedback. I want to thank everybody for really giving us your time. We know that time is valuable, people are on their way back to work, some people sitting in their offices, listening on earphones, at the moment. Some of you probably even snuck off to the bathroom with your phone and a set of earphones, so, we really, really, do appreciate it. We are very grateful to be able to share this information with you guys. We, Dawie and I, have felt, in our business, that there’s a big, big consumer education factor that needs to happen. None of the other credit bureaus is doing it. Nobody has decided to step up and teach consumers the really important stuff. Everybody's just giving fluff but nobody's actually giving actionable steps. So, Dawie and I, in our fight for the consumer, in our fight for helping people understand the profiles, in our fight for trying to bring about a sense of financial clarity and a sense of financial freedom from the system, we are absolutely committed to delivering as much valuable content as possible. So please, your feedback is very, very important to us. Let us know how you find the webinars, give us feedback on our Facebook page, give us feedback on our YouTube channel, and most importantly guys, please subscribe to our channel. I know I say it all the time but without your subscribing to the channel, we can't get our message out there. The more people subscribe to our channel, the more we can get the word out about this and no other credit bureau in the country, is providing the level of education, has a level of commitment, that we have to the consumer out there, so, just want to thank everyone. From our side, tot siens; hamba Kahle; sala Kahle and we’ll see you in two weeks’ time.
David Bester 51:03
David Bester 51:05
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