Tips And Tools

What is the National Credit Act?

The National Credit Act, 2005 (“NCA”) came into effect on 1 June 2007 and provides protection for consumers who take up credit. The National Credit Act regulates the following credit providers:

  • Banks
  • Micro lenders
  • Retailers such as clothing and furniture stores
  • All businesses, companies, close corporations and individuals who do business on credit, provide loans, or charge interest on overdue accounts.

In addition, it regulates credit bureaus and Debt Counsellors. The Act regulates the following credit agreements:

  • Mortgage bonds
  • Credit facilities like store cards, bank overdrafts, credit cards,
  • Garage cards, personal loans, installment sales, leases, pawn and
  • Discount transactions.
  • Developmental credit
  • Incidental credit
  • Credit guarantee

Managing your credit profile

How to improve your credit rating

It is important for you to maintain a healthy credit profile as this will determine if you are able to access loans should you need them in future. Here are some tips to help you on this journey to financial wellness:

  • Be aware that credit providers are required to provide credit bureaus with a monthly update of how you manage your monthly payments. Credit providers will update the bureaus on payments made or missed and also the outstanding balance on the account. To help you to improve your credit profile:
    • Make your regular monthly payments in full and on time
    • Avoid non-payments and arrears
    • If you fall into arrears, make up the missed installment as soon as possible.
  • Avoid an excessive number of credit enquiries – a high number of recent enquiries may show that you are desperate for credit due to worsening financial situation.
  • When you are considering taking up a loan, make sure that you understand the total cost of credit. This is normally made up of the loan amount that you have applied for, interest and any applicable fees.
  • Try to keep your total monthly credit repayments to no more than 25% of your income.
  • You need to make sure that you can afford the monthly instalments for your loan, and include a budget (extra money) for any emergencies.
  • If you cannot make a payment due to unforeseen circumstances, contact the credit provider immediately to make an alternative arrangement.
  • Communication is very important between you and your credit providers, they are often accommodating and will review your situation if notified
  • Check your credit profile regularly – if you find inaccuracies on your credit report contact the creditor associated with the account or the credit reporting agencies to correct it immediately. Don’t let your credit health suffer due to inaccurate information.
  • Remember when you are tempted to buy on credit or take another loan, your main goal is to pay your existing accounts to keep a healthy credit profile
  • Give yourself time – establish a history of paying your bills on time and using credit responsibly before borrowing more.
  • You may also want to keep the oldest account on your credit report open in order to lengthen your period of active use.
  • Don’t ignore a letter of demand:
    • Never ignore a letter of demand, since it is often followed by summons from a court.
    • While it can be tempting to ignore it and hope it goes away, be assured it will only get worse
    • Get your free credit report today from a consultant and learn how to understand your credit profile.

Budget Planning

Do not buy items on credit unless you are sure you can afford the repayments. To determine whether or not you can afford your repayments, draw up a monthly budget for yourself.

Credit Tips

  • Try to keep your total monthly credit repayments at no more than 25% of your income
  • Make arrangement for unforeseen circumstances
  • If you cannot make a payment due to unforeseen circumstances, contact the credit provider immediately to make an alternative arrangement
  • Communication is very important between you and your credit providers, they are often accommodating to review your situation if notified
  • Check your credit profile regularly
    • If you find inaccuracies on your credit report contact the creditor associated with the account or the credit reporting agencies to correct it immediately
    • If possible check your credit reports regularly and take the necessary steps to remove inaccuracies. Don’t let your credit health suffer due to inaccurate information
  • All your effort in paying off your debts will only work if you do not take on more debt
  • Remember when you are tempted to buy on credit or taking another loan, your main goal is to pay your existing accounts to keep a healthy profile
  • Give yourself time – Time is one of the most significant factors that can build healthy credit. Establish a long history of paying your bills on time and using credit responsibly
  • You may also want to keep the oldest account on your credit report open in order to lengthen your period of active use
  • Don’t ignore a letter of demand:
    • Never ignore a letter of demand, since it is often followed by summons from a court.
    • While it can be tempting to ignore it and hope it goes away, be assured it will only get worse
    • Get your free credit report today from a consultant and start the journey of understanding your credit profile