ONLINE EXCLUSIVE: #JargonBuster – blacklisting

‘Blacklisting’ is a ‘catch-all’ term to describe what happens when someone is denied credit due to a poor credit record, and although it is commonly used, it’s seriously misleading.

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“The term suggests that there’s a central ‘black’ list. There is no such thing and you can’t get blacklisted. It’s a lazy way of trying to explain why someone was denied credit and it’s dangerous because it implies there’s nothing you can do about it,” said Marlies Kappers, head of marketing at DirectAxis Financial Services.

The reality is that credit providers, such as banks and finance companies, base their decisions on whether to lend you money on information from credit bureaus.

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These are companies that calculate and base your credit score on your positive and negative behaviour.

If you pay your accounts on time every month, your credit score will reflect this and credit providers will look on your application more favourably.

You could, for example, receive a better interest rate and terms than someone with a lower credit score.

On the other hand, if you don’t settle your accounts, or you skip a month and pay twice as much the next month, this will show on your credit score.

Marlies added that the suggestion that a low credit score means you’ve been secretly blacklisted by some shadowy organisation, is not only wrong, but ignores two important points: Firstly, you have a right to know your credit score and secondly, you can do something about it.

South Africans are entitled to one free credit report each year.

You can get this from any of the major credit bureaus.

The report will tell you your score and you can also check for any mistakes.

If you have a low credit score and there are no mistakes on your account, you can still improve your credit score over time by settling overdue accounts.

This won’t clear your credit record, but will improve your score.

Reducing what you owe and paying off debt rather than moving it around, will also positively affect your score.

“Remember your score is based on information found in your credit report. This includes your payment history, amounts owed, activity on an account, the age of your accounts, any judgements or defaults and enquiries about your credit worthiness.

“Ultimately it is your behaviour that determines whether a bank or other financial institution will consider you creditworthy. The score is just a reflection of that behaviour whether good or bad,” said Marlies.