With the hundreds of lenders available in South Africa, and given how easy it is to apply for a loan from them, it’s not surprising to know that many are tempted to grab their offer. Some even take loans to the point that they’re not able to track them anymore. This results in credit defaults and ultimately getting themselves blacklisted.
But how will your financial status can be affected by getting blacklisted? Is there a way to recover from getting blacklisted? Read on to know more about the answers.
What happens when you get blacklisted?
Being blacklisted simply means you have a bad credit record and lenders should avoid offering you any kind of loan. Your credit history tells them that you have a high chance of being unable to repay your debts on time. This will make it a lot harder for you to get loans from banks and big financial institutions.
The major credit bureaus decide whether to give you the blacklist tag or not. The rating they give is based on the way you handle your debts and how you use credit facilities.
Your name on the credit blacklist can remain there anywhere between 3 to 10 years, depending on the severity of your over-indebtedness or your capability to clear all your debts. If you’ve been given a court judgment or you’re undergoing debt rehabilitation, it may take you around 5 years to recover and get a good credit status. For severe situations like sequestration, wherein your property had to be seized to repay your debts, it may take you a good 10 years to regain an acceptable credit rating.
Clearing your name from the blacklist
There’s still a way to get out of being blacklisted by credit institutions. Here are the steps you have to take to clear your name from being blacklisted in South Africa.
Get a credit report
The first thing you have to do is to determine why you’ve been blacklisted. Pull up your credit report and look at the entries there to see any item that caused the problem.
Look for the following items on your report as these are the problems you have to resolve to regain your healthy credit status.
- Adverse classifications
- Court judgment
- Debt restructuring
- Debt administration
- Consumer remarks
You should check your credit report at least once a year. As stated in the National Credit Act, you’re entitled to get one free credit report every year so there’s really no excuse to not take advantage of it.
How you pay your loans is the biggest criteria used to rate your creditworthiness. You’re good as long as all your arrears are up to date.
Your payments for the past 2 years will all reflect on your credit rating. The recent 3 to 6 months, though, are given more weight so make sure you settle all current debts accordingly.
Settle the issues
Settling judgments should be your first order of business. Prioritize clearing this problem above the others as these have more adverse effects on your credit status. The other problems can be renegotiated with your creditor.
If you have defaulted on a loan, settle them and talk to your creditor to see if you can persuade them to remove the defaulted loans on your credit record. If you fail to do this, you have to wait for a year before the entry is removed from your credit report.
You don’t have to settle all your debts at the same time. This won’t have a big positive effect on your credit score as you might expect. What you should do is to show that you’re able to repay all your bills and debts on time.
It’ll be hard to take on additional loans if you’re blacklisted. However, if you can take on another debt, try applying for loans offered especially to blacklisted individuals. It will help your credit rating if you can show that you can repay this new loan on time. Use this option sparingly and for emergency purposes only to avoid getting yourself into deeper trouble.
Ask for help
If you’re still having trouble settling and managing all your debts by yourself, you can seek help from organizations that provide services in eliminating negative credit records.
ITC Assist is a service offered by the ITC to help South Africans recover faster from having a bad credit record.
You can get your hands on any of the following services they provide:
- Get your credit record from all 4 credit bureaus in the country.
- Removal of default and adverse listings on your credit report.
- Elimination of garnishee and administration orders.
- Removal of judgment listings.
If you think there’s a wrong entry or you’ve been blacklisted without proper cause, you may file a dispute to the Credit Information Ombudsman. Credit bureaus are required to investigate your dispute within 20 days after lodging it.
Credit bureaus won’t put you in the blacklist just because they want to. As a matter of fact, lenders encourage borrowers to contact them immediately if they’re having difficulties in fulfilling their debt obligations. They’ll appreciate it more if you explain to them your situation honestly.
If all else fails and you get blacklisted, just follow the steps we’ve listed above. Stay patient throughout the process and make sure you fully coordinate with your creditors in every step of the way.