“In the past,” he says, “banks were more willing to make some allowances for those without perfect credit histories. And as consumers, we became accustomed to making late payments or even skipping one or two instalments without severe consequences.
“But those days are over. Apart from the fact that we have the National Credit Act (NCA) to regulate lending in SA, compliance and assessment criteria are being even more stringently applied by lenders as consumers come under increasing financial pressure from rising inflation and interest rates, high household debt levels and the increasing risk of unemployment.”
He says that banks and other credit providers are currently under severe pressure to limit risk and prevent large-scale defaults on home loans, credit and store card balances, cell phone accounts and vehicle financing as well as personal loans.
“This is all part of the good financial picture that SA needs to build up over the next six months to keep up its international investment rating. The banks also need to build up their reserves in terms of the Basel III international banking regulations, and on top of this, no credit provider wants to get ‘burned’ now as so many did after the 2008 financial crash.
“So caution is the watchword, and we expect that lending will increasingly rely on proof of excellent creditworthiness – that is, a really great credit record – as well as factors such as affordability.”
Rademeyer says that what this means is that any default, judgment or evidence of bad credit management incurred now is going to make it extremely difficult to acquire any kind of credit for the foreseeable future. “And this will affect consumers who need credit clearance to buy cars and furniture, rent a property or take out a phone contract as well as those applying for home loans, so it is vital for everyone to protect their credit record.”
He also has some advice for those who feel that they are already in a debt-trap and at risk of doing severe damage to their credit records: Admit the problem and start dealing with it immediately.
“There is usually no quick solution if you have a lot of debt, but you can avoid trashing your record if you are quick to recognise the problem and to make alternative payment arrangements with your creditors.
“In the case of homeowners who are having trouble keeping up with their bond instalments, for example, the bank will usually be much more amenable to rescheduling the debt if approached before the interest outstanding has become unmanageable.
“All the banks also have special ‘distressed seller’ programmes to assist homeowners who admit that they can no longer afford their repayments to sell their properties, pay off their debts and save their credit records so that they can rent or even buy another, more affordable home.
“And this is definitely a much better option than doing nothing and then having your home repossessed and sold in execution of a debt judgment that is likely to damage your financial prospects for years.”
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