Money and Markets

A Covid-19 payment holiday may – but shouldn’t – mess with your credit record. Here’s how to check

Business Insider SA
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  • Payment holidays or extended payment deals on debt granted due to the Covid-19 disaster shouldn't mess with your credit record and ability to get more debt in future – unless the credit provider gets things wrong.
  • You can check your own credit record for free to make sure that hasn't happened.
  • Debt collectors say they're in discussions with credit bureaus about a system to be notified about people on UIF support, so they are not pursued for payment, but the bureaus aren't commenting yet.
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If you have applied for and been granted a payment holiday, or extended payment terms, on any debt due to the Covid-19 disaster, that shouldn't reflect poorly on your credit record – if everybody does their jobs properly.

But it is possible that banks and other credit providers may not properly communicate such arrangements to credit bureaus, which may then flag you for non-payment, making it harder or more expensive to get debt in future.

So it is probably worth checking your credit record, just in case.

Lenders and credit bureaus are working together to make sure that such special arrangements "are correctly reflected on the credit bureau and that consumer profiles are not unduly negatively affected," South Africa's credit bureaus said in a joint statement via the Credit Bureau Association (CBA) in response to questions from Business Insider South Africa.

"Credit bureaus have conducted an impact analysis on the variables that make up score cards and affect consumer scores.  We have found, provided that credit providers correctly submit data to the credit bureaus for any payment holidays/extended terms provided in terms of Covid-19... consumer credit scores should not be impacted."

But that depends on the lenders using a set of "data submission guidelines". 

For those who do not have arrangements in place there may also be hope, of at last not having debt collectors pursue them immediately.

There are "discussions to mark any person who is receiving UIF or other state assistance which will also allow debt collectors to know beforehand not to contact those individuals," said Andries Cornelius CEO of the Council For Debt Collectors.

South Africa's credit bureaus, via the CBA did not respond to questions on that initiative.

While debt collection was not classified as an essential service alongside many others in the financial world – in what appeared to be a deliberate government effort to keep debt collectors from knocking on doors in the short term – they may operate on a work-from-home basis.

But that may have inadvertently blocked some South Africans from being able to access coronavirus-related relief on their debt.

See also | All the help South African banks are offering consumers due to Covid-19

In order to access the vast majority of schemes on payment holidays, reducing payments, and other concessions, borrowers must be in good standing on their accounts. Those who are classified as in arrears or as non-payers, must first make payment arrangements to clear their records before they can apply for Covid-19 relief.

And that is not always possible, said Cornelius. Once debt-collection proceedings are initiated, the bank or other lender hands over files and information to the debt collector. Those clients of the debt collectors "are no longer actively involved in the process, nor do they necessarily have all the information". A consumer who phones up a bank may be referred to the debt collector – and the debt collector can be hard to reach, or may not be able to access files stored at an office, 

Meanwhile, a negative credit listing – whether accurate and up to date or not – could be trouble for both lender and borrower down the line.

Credit bureaus "expect scores to deteriorate over time as the economy takes strain and further consumer default positions emerge," they said through the CBA this week.

That could cause technical problems. 

"Extending credit to an individual with a listing could very well be considered as reckless lending which in turn is punished by the National Credit Regulator," said Cornelius.

Here's were you can check your credit record, as a first step to fixing any errors in it:         

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