Debt counselling is just another way of taking control of your debt. Mmadikwa Phoshoko, debt counsellor at Legal & Tax says, debt counselling is a legal process where you apply to have your debt restructured so that you can pay household expenses and still be able to pay off debt at a reduced instalment at the end of the month. Debt counselling is far from an easy process, says Phoshoko, but it is better than having your goods repossessed or getting blacklisted by a credit bureau.
How debt counselling benefits you:
- It helps you pay off your debt at a rate that you can afford.
- No more threatening letters, rude phone calls or other harassment from your creditors.
- You deal with a debt counsellor rather than with your creditors.
- You won’t face the threat of legal action.
- You will have a controlled, manageable household budget that will allow you to pay for life’s necessities.
- You will have peace of mind knowing that your debt situation is under control.
- Your assets will be safe from repossession or from being seized.
- You will learn a lot about managing money so that you will know how to stay out of the debt trap in the future.
CREDIT SCORES AND CREDIT REPORTS
Your credit report is a very important document that you should check regularly.
Every person who has credit – a personal loan from a bank or a micro lender, an account at a clothing or furniture store, a car loan, or a hire purchase agreement – has a credit report that is maintained by a credit bureau like TransUnion. There’s no fee to get a copy of your TransUnion credit report from a credit bureau. The law states that every consumer is entitled to one free credit report from each of the credit bureaus once every 12months. Getting your credit report requires only a phone call to their call centre or from the TransUnion website. Once you have been successfully verified through the provision of specified documents which will be requested from you, your credit report will be faxed or emailed to you.
How your Credit Report works
Many, if not all of the institutions with which you have credit –banks, shops at which you have accounts, cellphone or satellite TV company where you have a contract- send details about how you pay your account to the credit bureaus on a regular basis. This information is compiled into what’s known as your payment profile. This is a 24 month log that shows all the accounts that you pay in full and on time (what can be classified by the credit provider as ‘good credit behaviour), as well as any late payments or skipped payments (which may make the credit provider score you less favourably). It will also show any default accounts which are more than three months in arrears even if you haven’t been handed over for collection or legal action. The log will also show where and how often you have applied for credit in the past 24 months. Different types of credit information remain on your credit report for different lengths of time from one year for not paying an account on time and in full every month, to five years for having a civil court judgment against you – so it is important to always pay your bills on time.
How to improve your credit score
There are several factors that are considered in the calculation of your credit score. The most important of these are:
- Account payment history – how you manage your accounts and whether you do or do not pay the entire instalment amount on time.
- Too much debt – how much you owe and how much of your available credit you’re using.
- Negative information – publicly available information in your credit record, such as bankruptcies and judgments, indicating you did not honour a particular debt obligation.
- Length of credit history – how long each of your accounts has been open.
- Account application and enquiry activity – within a short period of time, how many account applications you submitted and how many new accounts you opened.
The following steps can help you achieve healthier credit:
- Pay the amount due on every one of your accounts in full and on time.
- Limit your utilisation of credit; manage your debts responsibly; and avoid applying for too much credit.
- Check your credit reports – and your credit score – regularly. Look for anything that does not seem right and dispute any inaccuracies. This will safeguard you from identity theft
