Will you be Blacklisted if you’re under Debt Review?

The fear of being blacklisted and going under debt review is a significant concern for many individuals struggling with debt. 

Many South Africans  are left wondering: does undergoing debt review mean you are, or will be, blacklisted?  Understanding the difference between being under debt review and being blacklisted can change your financial future.

This blog aims to clarify this question, ensuring you are informed about your options.

Understanding being Blacklisted vs. Debt Review 

Being “blacklisted” means that your credit report contains negative information, which can affect your ability to access credit and other financial services.

Here are four key points about what blacklisting means and how it can affect you:

1. Credit Application Rejections

Lenders and financial institutions heavily rely on your credit report to assess your creditworthiness. If you’re blacklisted, your applications for loans, credit cards, and other forms of credit are likely to be rejected automatically.

2. Higher Interest Rates

If you manage to secure credit despite a poor credit record, expect to face significantly higher interest rates. Lenders view you as a high-risk borrower and compensate for this risk by charging more.

3. Limited Financial Opportunities

Being blacklisted limits your access to various financial products. Banks and lenders often have products tailored for individuals with good credit, which might not be available to those with a negative credit history.

4. Employment and Rental Challenges

Some employers, especially in the financial sector, conduct credit checks as part of their hiring process. A poor credit record can hinder your job prospects. Similarly, estate agents often perform credit checks, making it difficult to rent a property if you are blacklisted.

Debt Review is a Structured Path to Debt Management 

Contrary to blacklisting, debt review is a formal process outlined in South Africa’s National Credit Act, designed to assist individuals overwhelmed by debt. 

Here’s how Debt Review can be beneficial: 

• Debt Free in an Affordable Manner: The process allows you to consolidate your debt into an affordable reduced repayment.
• Living Expenses Covered: Debt Review ensures your living expenses are covered, with the peace of mind that your debt is being paid every month.
• Legal Protection: While under debt review, creditors are prohibited from taking legal action against you, providing a grace period to reorganise your finances.
• Financial Management: A certified debt counsellor assesses your financial situation, restructures your debts, and negotiates with creditors to establish a manageable payment plan tailored to your financial capabilities.

The Impact of Blacklisting on Your Credit Score 

Persistent Challenges

Being tagged as “blacklisted” reflects a history of financial missteps, including missed payments or defaults, which can linger on your credit report for years. This enduring mark can continue to affect your financial stability long after the debts have been cleared.

Rebuilding Your Credit 

Post-debt clearance, the next step is rebuilding your credit score, which likely suffered due to past financial troubles. Improving your credit is a long process that requires time, consistent financial discipline, and patience.

Positive Effects of Debt Review on Your Credit Score 

1. Protective Measures During Debt Review 

During debt review, your credit report will reflect a “flag” indicating that you are undergoing this process. This is crucial as it prevents you from incurring new debt, thus shielding you from further financial strain.

2. Clearance and Credit Reset 

After successfully completing the debt review process and settling all outstanding debts, you will receive a clearance certificate. This certificate is significant as it results in the removal of the debt review flag from your credit report.

3. Fresh Financial Start 

Your credit report is essentially reset, offering you a fresh start to rebuild a healthy credit score. This reset can be instrumental in re-establishing your creditworthiness in the eyes of future lenders.

What are the Misconceptions of Blacklisting vs. Debt Review?

Understanding Your Options 

It’s important to correct the common misconception that debt review can lead to blacklisting. Instead, it provides a structured, legally recognised pathway to address overwhelming debt, ultimately aiding in regaining financial control.

Choosing Debt Review 

For those struggling with debt, it’s critical to recognise that debt review is intended to support, not hinder, your financial recovery. Engaging in this process will not result in blacklisting but will be a significant step towards achieving financial freedom and stability.

For more detailed guidance and to determine if debt review is suitable for your situation, Debt Rescue offers expert services. We provide thorough support throughout the debt review process, ensuring that you are well-informed and able to make empowered decisions about your financial future. Understanding blacklisting and the benefits of debt review can be transformative, setting the stage for a more secure financial outlook.

Are you struggling with debt while earning an income? Do you owe more than R35K in total to creditors? If so, let our expert debt counsellors provide a no-obligation, cost-free assessment to consolidate and reduce your monthly repayments for immediate financial relief.

Contact us to speak with our expert counsellors and start your journey toward financial freedom.