AFTER DEBT REVIEW
Is it possible to improve your credit record after debt review without taking on new debt?
HANNALIE CROUS, HEAD OF RETAIL CREDIT AT FNB, REPLIES:
It is important to note that a bank will consider the fact that you were under debt review as a positive rather than a negative move because you took action when you realised you were not managing your debts.
The best option would be to avoid taking on any more debt after being cleared. Credit providers will view this in a positive light because it reflects that you are fully rehabilitated and are able to manage your financial affairs in a responsible manner.
The credit bureau’s records reflect payment behaviour on credit-related agreements, which include cellphone services, insurance and DStv subscriptions.
So, having a product such as a cellphone contract or insurance policy, and paying the monthly amounts owed on time and in full, will enable you to build up a positive payment profile at the credit bureau without taking on debt.
Payment profiles established through the phone contract and insurance agreements should enable you to re-establish a positive profile. It is always better to save if you want to buy more expensive, durable items. Credit should ideally only be used to acquire assets such as a home.
If you decide to take on a credit card or store card to build up a favourable credit record, you could consider a small credit limit on the card and ensure the full outstanding amount is paid up in full each month, thus leaving no debit balance.
This will in effect establish a payment pattern that credit providers can take into account without the consumer incurring outstanding debt.
However, it is important that you manage this arrangement carefully and stick to the principle of not taking on more credit and, therefore, do not fall back into a situation where you become reliant on credit.