Debt Restruct

How Does Debt Review Affect My Credit Rating?

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We can’t overemphasize how important the ability to borrow money is. For instance, most people save the total amount required when considering buying a home. Therefore, they have to work with lenders. Unfortunately, a borrower’s financial situation can change midway through repaying their debt. Which makes it nearly impossible for him/her to continue to pay the debt as initially agreed with the lenders.

In such a case, the borrower could be at risk of facing legal actions from their creditors and could even lose some of their possessions. The good news is that debt review, a legal process under the National Credit Act, protects such over-indebted South Africans.


But what exactly will happen to your credit profile and credit score during debt review?


Effect on Your Credit Rating & Credit Profile

Of course, being under debt review will have a significant impact on your credit profile. This is because it creates an impression that you are unable to meet your financial obligations. Luckily, this won’t affect the debt review process since additional lending is discouraged and prohibited while undergoing debt review. Besides, you won’t need to borrow more money. Your repayment plan takes all of your expenses into consideration. It reduces your monthly debt instalment so that you can comfortably cover the cost of living.


Your Credit Score Won’t Get Any Worse

Your credit score reflects your ability to pay your monthly credit on time. Therefore, if you default on any loan payment or fail to service your loans as initially agreed with creditors, your credit score will suffer. The credit score is based on the data provided to credit bureaus by lenders. Fortunately for you, credit bureaus cannot continue to list any damaging information on your credit profile when you are under debt review.

In any case, being under debt review shows that you are determined to correct your financial situation and are taking steps in the right direction. Over the long term, this positive attitude towards repaying your debt could improve your credit rating.

Check to see if you qualify to reduce your debt instalment with our quick quiz

You Will Get Creditors off Your Back 

As mentioned earlier, being over-indebted puts you at the risk of losing assets. When you have defaulted on a loan, the lenders have the right to take legal action against you, and you may end up losing your assets. The good news is that once you are under debt review, your debt counsellor will inform the credit bureaus, who will immediately flag your credit profile to indicate you are under debt review. Forcing harassing creditors to leave you alone. Consequently, this will give you the protection you need since credit providers cannot take legal action against you once you are under debt review.


Your Credit Profile Will be Clean Again

Debt review can seem like a daunting process. Be that as it may, we assure you that it is worth it! Time will fly whilst under debt review, and you’ll be able to live more comfortably. Then, when all is said and done, you will be debt-free and all or your belongings-, and your family safe.

Once you complete the debt review process, your debt counsellor will inform the credit bureaus, and a clearance certificate will be issued. The credit bureaus will wipe the history of debt review from your record. With time and commitment, you can improve your credit rating and make sure that your credit profile looks better than ever before.

The Bottom Line

Overall, it is apparent that if you are over-indebted and cannot continue making your loan payments, that you may be at risk of facing legal action from creditors. In fact, you might even end up losing your assets. Thankfully, you have options under the National Credit Act. This law provides for debt review to protect over-indebted South Africans from creditors and can help rebuild your credit profile in the future. Although being under debt review affects your credit profile to the extent that you cannot borrow more while still under debt review, you will be debt-free at the end of the process, and your credit profile will be clean again.

Do you know whether you qualify?

Find out if you’re eligible to reduce your debt and protect your belongings.

Disclaimer: This website and any information herein is not intended to be, nor does it constitute, financial, tax, legal, investment, credit, or other advice. Before making any decision or taking any action regarding your finances, you should consult a qualified professional directly.

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