A low credit score could be costing you thousands of rand a year. Credit-scoring systems are used by creditors to determine how much you can borrow, the interest rates you pay or the cost of life insurance. If late payments, bounced checks, or bankruptcy have ravaged your credit, here are five steps to restoring your financial health.
1. Monitor your "debt-to-income" ratio
Your debt, not including your bond repayments, shouldn't exceed 15% of your take-home pay. For example, if you earn R10 000 a month, the amount you owe on credit cards, car payments and other debts should never top R1 500. If you're paying more, it may be time to cut back.
2. Pay more than the minimum and read the fine print
Many South Africans pay only the required minimum on their credit cards. The bulk of these payments go toward interest on your debt and bank fees. The higher your payment, the more of it goes toward your principal balance. Also, to determine when your annual percentage rate (APR) may be increased and keep interest rates from creeping up on you unexpectedly, read the fine print of your credit card agreement.
3. Check your credit report annually
Many consumers are paying higher interest rates than they should, because they've failed to correct errors on their credit reports. Get in the habit of checking your report at least once a year to ensure that all of the information is accurate. South African consumers are entitled to one free check annually.
4. Hang in there
Negative information on your credit report can typically be reported for seven years. But the more time passes, the less damaging the information becomes. After 10 years everything from late payments to bankruptcy is expunged from your credit report and you effectively start from scratch.
The Secrets To Business Credit. This Book Shows You How To Get Credit For Your Business Easily! After you’ve read Business Credit Secrets, you’ll understand all you need to know to navigate the credit maze with ease and confidence. Let’s face it – money makes the world go ‘round. The bankers have most of the money. And as the old cliché goes, “It takes money to make money.” Your business cannot grow very far without infusions of cash to help it grow. And if your credit is less than perfect when you start up, that’s okay – there are tips and secrets on how to build up your credit at the same time you’re building up your business.
The National Credit Act (NCA) of South Africa
In a nutshell, the Act:
Provides one set of rules for all credit activities, Aims to prevent reckless lending, over-indebtedness and unfavourable lending practices, and Establishes new and improved rights for credit consumers.The 7 most important aspects that you should know about the NCA
1) Who does the Act apply to?
The NCA applies to credit agreements with all consumers entered into after 0I June 2007, and to entities such as close corporations, companies, partnerships and trusts, whose asset value or annual turnover is below R1 million.
This new legislation will affect you if you are applying for any of the following types of products:
Overdrafts Credit cards Instalment agreements Mortgages Financial leases LoansHire purchase agreements2) Consumer rights
Credit bureaus: The Act gives consumers the right to access and challenge their credit record and information held by credit bureaus. In addition, all information that credit bureaus keep about consumers is regulated.
Language: Consumers have the right to receive documents in plain and understandable language and they may also request a document in any one of two official languages.
3) Marketing practices
The Act aims to put a stop to misleading advertising around credit, credit products and facilities, and the cost of credit.
Negative option marketing (whereby an agreement will automatically come into existence unless an offer is specifically declined) is not allowed
Phrases like "no credit checks", "free credit", and "guaranteed loans" cannot be used. Marketing of credit at the consumer's home or workplace is prohibited without the consumer's consent.
Consumer choices must be obtained and kept as a record.
4) Pricing
All new credit agreements need to disclose interest rates, fees and additional charges and also subjects interest rates charged to a maximum rate of interest that may be charged. These cost controls prohibit interest or other costs in excess of those prescribed rates.
Add-on costs for insurance are prohibited. All costs must be advised in advance and the consumer has the right to arrange insurance directly, rather than pay the credit provider to do so, and to choose to arrange his or her own insurance policies.
5) Applying for credit under the NCA
Pre-agreement: The credit provider must provide the consumer with a pre-agreement, containing the main features of the proposed agreement and a quotation of the costs. This pre-agreement is valid for 5 days and gives consumers an opportunity to shop around for the best deal.
Credit assessment: The consumer will be required to provide certain information in order for the lender to assess affordability. This may include a detailed statement of income and costs, a household budget and details of other credit commitments.
Credit bureaus: The Act requires the credit provider upon entering or amending or terminating a credit agreement to report the transaction to a credit bureau.
Records of application: Credit providers will be required to keep records of all applications for credit, credit agreements and credit accounts for a prescribed time.
Payment of accounts: A consumer may pre-pay any amount owing at any time, and fully pay out the account at any time without penalty, except in the case of mortgage bonds or agreements in excess of R250 000, which are subject to a termination charge of not more than three months interest.
Spouse's written consent: For marriages in community of property, the Matrimonial Property Act, following from a consequential amendment made by the NCA, requires the written consent of the spouse, when one spouse applies for credit.
6) Over-indebtedness and reckless lending
The Act aims to promote responsible credit granting and use. To achieve this, when a customer applies for credit, a credit provider would need to check whether the consumer can afford the credit because if no check is done or if it can be shown that the consumer clearly could not afford to repay the credit agreement, it could be alleged that the credit provider has granted the credit recklessly, with severe consequences to that credit provider.
During this affordability assessment, the onus is on the consumer to fully and truthfully answer any request by the credit provider for information.
In the case where a consumer gets into too much debt, a debt counselling service is offered.
7) Complaints
The National Credit Regulator will monitor credit providers and their compliance with the Act and regulations.
A National Consumer Tribunal is established to adjudicate in a wide variety of applications, and to conduct hearings into complaints.
Click here for a more complete summary of the Act.
Small Business South Africa - Credit for Small Business South Africa
Useful contact details
The National Credit Regulator (NCR)
The National Credit Regulator (NCR) was established as the regulator under the National Credit Act 34 of 2005 (the Act) and is responsible for the regulation of the South African credit industry. It is tasked with carrying out education, research, policy development, registration of industry participants, investigation of complaints, and ensuring enforcement of the Act.
Call centre 0860 627 627
Website www.ncr.org.za
Email info@ncr.org.za
SPONSORED LINKS
Buy your next computer online to get the best deal.
Compare different homeloans and get the best deal. No obligation quotes online.
Find the best insurance to cater for your need. Car insurance, household insurance, personal insurance or travel insurance.
The best deals in the comfort of your own home. Online shopping in South africa.
Buy your next digital camera from the experts. The best prices and quality.
The best deals come with choice. For the best online webhosting deals shop around.
Bridging finance essentially is a short term loan that is set up between you and a financial institution that specializes in these loans, which allow you to gain access to your money. Invela Financial Corporation offers property sellers, buyers and bond "switchers" access to 80% of the value of the net surplus proceeds of their transaction.
Their standard discount fee is R1.12 per R1,000 per day plus a 1% initiation fee (up to a maximum initiation fee of R1,000). Actual fees may be negotiated lower if the size of the bridge loan is large.
Business South Africa - Business credit and the South African Entrepreneur. Business opportunities, business plans and business links.
