Debt review is a debt relief process that helps over-indebted South Africans become debt-free. By negotiating with your creditors and reducing your debt repayments you’ll have more money available for other monthly expenses.
Yes, debt review will have an impact on your credit score. However, this is temporary and you can rebuild your credit score when you’ve completed the process. Once you’re under debt review you will be flagged which will prevent you from making more debt. Making more debt would defeat the purpose of the debt review process and prevent you from becoming debt-free.
How exactly will your credit score be affected by debt review?
How will your credit score be affected when you’re under debt review?
Once you’re under debt review your debt counsellor will notify all the credit bureaus that you’ve enrolled to the process. The credit bureaus will tag your credit profile with a debt review flag. This has been put in place to prevent you from making more debt.
Banks and other creditors will see the debt review flag as a positive. This will show them that you are serious about becoming debt-free.
How long does the debt review flag stay on your name?
When you complete the debt review process your debt counsellor will send a clearance certificate to you, and all your creditors and credit bureaus. As soon as the creditors receive the clearance certificate they will mark your debt as ‘paid’. The credit bureaus will then remove the flag from your name and set your report back to zero.
What happens when you complete the debt review process?
Your credit score will be set back to zero once you’ve completed the debt review process. Which means you’ve got a second chance to build a great credit record, from scratch.
How do I build my credit score after debt review?
Because you’re rebuilding your credit record from scratch, you should be patient. Building a great credit score takes time.
Starting with a cell phone contract or insurance repayments are good starting points. Ensure that you make payments on time all the time. As soon as you miss a payment your credit score will be negatively affected.
Once you’ve built up some credit and that reflects positively on your credit record, you can open a store card or credit card with a very low credit balance. Only use this card when you really need to and ensure that you pay the full amount within 2 weeks of your purchase. This will help you rebuild a good credit score over time.
Should you be concerned?
No, you should not be concerned at all. Going under debt review will only temporarily have an impact on your credit report. That is because you’re making smaller repayments towards your debt each month. Once you’ve settled all your debt and you’re debt-free, you will have access to credit again and you can start rebuilding a healthy credit report.
If you require more information, please leave your contact information below and one of our friendly consultants will be happy to assist you.