By Dr Eugene Brink
Being blacklisted is something that has gained significant notoriety in South Africa. It tells how careless a person has been with his or her money and could seriously hamper his or her ability to borrow money and get credit in future.
Unfortunately, on the whole, it reflects negatively on a person’s character and casts considerable doubt on his or her trustworthiness.
Unfortunately, impaired credit records are a very common problem. According to the National Credit Regulator (NCR), close to 10 million South Africans had such records in 2018 – and it is growing. This could be ascribed to numerous factors, such as South Africans simply living above their means and the economy forcing working people to use credit more often to service their basic needs.
What does being blacklisted mean? This is more complex than one might think.
One of South Africa’s leading credit bureaus, Transunion, argues that although “blaclisting” and “blacklist” are still terms widely used among South African consumers, they are misleading terms. They denoted a category that dates back to when credit bureaus only kept negative information.
Today they hold both positive and negative data and it simply means that you have an account with a particular service provider who makes use of credit bureaus. Often credit checks bring up long-forgotten bad credit decisions, but it can change and don’t have to last forever. “Your credit profile is a ‘snapshot’ of how risky you appear to be at any particular point in time. The snapshot changes as new information is added to your bank and credit bureau files,” says Transunion.
Debt counsellors Vantage Debt Management say being on a blacklist is commonly mistaken for a formal and controlled mark on a consumer’s credit report that prevents him from incurring further debt. “This is not entirely true and there are no strict, hard and fast rules to becoming blacklisted. An actual list of blacklisted consumers does not exist. One cannot look at a credit report and say that a person is blacklisted – this is not how it works. Your credit history and credit score determines whether you can incur more debt.
“If you have a low credit score and bad credit history and cannot take out more debt you are known as ’being on the blacklist’.”
A credit score could be impaired for a number of reasons, such as missing debt repayments, missing cell phone contract payments, having too much debt, failing to pay arrears and legal action.
Sarfaraaz Hamza from debt counselling company ezDebt says the term “blacklisted” is quite general and may apply to a whole range of situations consumers may find themselves in. “It could be related to having an account in arrears or possibly having a judgment against you.”
Some of the adverse information on your credit record may remain there for longer or shorter periods. For instance, a court judgment – where a court issues an instruction to you to pay an outstanding amount – will stand for five years. “If you pay the full amount owed before that time, the judgment will be removed from your credit report as soon as the credit bureau receives either proof of payment from the credit provider or a valid court order rescinding the judgment,” says Hamza.
Every time a consumer applies for credit, the credit provider will also make an enquiry about the consumer’s credit record. This information stays on the report for a period of one year. “A high number of these enquiries could indicate that you are ‘shopping around’ for too much credit, which could indicate that you may be in financial difficulties,” says Transunion.
What to do
Transunion states that seeing that your credit profile is a “snapshot” of how risky you appear to be at any particular point in time, this snapshot changes as new information is added to your bank and credit bureau files. Even if you have been remiss and reckless with credit in the past, you can increase your creditworthiness again by being more responsible with credit in the present and future.
Transunion advises you to first contact your creditors and work with them to set up a different payment schedule or interest rate. Avoiding further debt is also an obvious yet often-ignored step in this process.
Vantage Debt Management advises that if consumers are under significant financial stress, they should contact a debt counsellor. A debt counsellor will draw up credit reports and advise on how to improve a credit score. You could also undergo debt review, says Hamza, whereby a debt counsellor serves as a mediator, through a magistrate’s court, to negotiate on your behalf with creditors for a new repayment plan.
The best and most simple advice is to draw up a budget and stick to it. And don’t ignore and neglect communication from and with your credit providers.
Sarfaraaz Hamza, 5 August 2017, “The consequences of being blacklisted in South Africa”, https://www.ezdebt.co.za/blog/consequences-blacklisted-south-africa/.
TransUnion, 2017, “How long does negative information remain on your credit report?”, https://www.transunion.co.za/archives-article/how-long-does-negative-information-remain-on-your-credit-report.
TransUnion, 2017, “Do you think you have been blacklisted or have bad credit?”, https://www.transunion.co.za/education/blacklisted?channel=paid&cid=ppc:google:GNBDSACreditHistory&gclid=Cj0KCQiA37HhBRC8ARIsAPWoO0zLwGXvQasK1nHrFFnK3M94q0cirdW4QMoxdtLNDD2csLW4qNQykTsaAtyFEALw_wcB.
Vantage Debt Management, 17 December 2017, “The truth about being blacklisted In South Africa”, https://www.vantagedebtmanagement.co.za/debt/blacklisted-south-africa-2/.