Meaning of Blacklisting

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Blacklisted - What is the meaning of being blacklisted

The term blacklisted or blacklisting is often a term that has become widely used in recent years to define when a consumer does not qualify for new credit facilities. These rejections result from an impaired credit record and not because your name appears on a blacklist. Historically, blacklisting has emerged in response to credit bureaus only keeping adverse and negative credit information on a consumer's credit report. This kind of adverse information would include:

Judgements,
Sequestration orders,
Administration orders
Debt review indicators
History of poor repayments

The first credit scoring model was created in the late 1980s by Fair, Isaac, and Company. It encouraged credit providers to share a combination of positive and negative information so that an accurate credit score could be computed based on consumers' conduct. The credit score reflects the risk level and probability of future payments associated with that consumer. There are thereby no grounds for the claim that a credit bureau will only store negative details about your credit history and that they will not collect any positive information about your credit history.

An impaired credit record is when there is a record of non-payment of outstanding debts on loans, credit cards, bonds, and clothing accounts. As this overused phrase "blacklisted" is being used there is, in fact, no blacklist out there. Consumers cannot get blacklisted as getting blacklisted does not exist.

In South Africa, credit bureaus report on consumers payment behaviors. Should a consumer have a poor repayment credit profile, prospective credit providers will decline new credit facilities. This rejection does not mean that the consumer is on a blacklist.

A credit report is a snapshot and history of a consumer's payment behavior. The history of this information may be reflected in their credit report for a period ranging from 1 year – 10 years. The information on the credit report includes good and bad payment behaviors. Consumers see negative information such as judgments or having a poor payment profile as being on a blacklist. These consumers assume that they have now been blacklisted. Having a low credit score due to negative information might also get misconstrued as being a blacklisted consumer.

There is good news for consumers who find themselves with a poor credit record and who believe they have been blacklisted. A credit report can get worked on. Consumers who work on certain aspects of their payment behavior can turn an average credit report back for good. We will discuss later in this article how to improve credit scores.

What does it mean to be blacklisted or to have an impaired credit record?

The following adverse information will negatively affect credit scores. This negative adverse information will result in a consumer having an impaired credit record or alternatively known as being blacklisted.

Judgment information. Non-payment of accounts will result in credit providers seeking help from the courts to demand payment. A summons will be issued and if the matter is not defended in court a default judgment will be granted. This judgment information will reflect all the credit bureaus. This adverse information might prevent consumers from getting future credit applications approved.
Default enforcement listings. Non-payment of an account will result in credit providers seeking help from collection agencies to collect money. These collection agencies might report to the bureaus that legal collections are underway. An enforcement default will reflect on the consumers' profile. This listing influences credit scores.
Debt review or debt counselling indicators: Consumers who are under debt review will have a debt review indicator on their credit profile. Debt counselling a debt relief measure in the South African National Credit Act (NCA) in 2007. This debt relief measure is intended to assist over-indebted consumers. In terms of the Act, a debt review indicator will reflect on the consumers' profile. The over-indebted consumer will not be able to take on any new debt. As this is not a negative listing, consumers will regard this listing as getting blacklisted.

The following factors affect a low credit score.

Many enquiries were made in a brief period.
Adverse information as discussed above.
High balances with current credit providers.
Many Payday or 1-month loans on the credit profile.

How does a consumer know if they have been “blacklisted”?

The following will give a consumer a sign that there is negative information on their credit record.

The consumer got declined for:
- New credit facilities.
- Employment.
- property rentals.
- Bond and vehicle finance applications.
Received a summons to appear in court for an unpaid debt.
The consumer is aware of a history of overdue payment towards current and past debt obligations.
Credit bureau investigations. The National Credit Act provides those South African consumers are entitled to their credit report free of charge once in a year. Consulting this free credit report a consumer can establish if there is any negative information.

The 4 main credit bureaus are

To access their contact details please follow this link Credit Bureau Contact information

How to prevent getting blacklisted

Pay all debt instalments on time in full. Paying even ten Rand less than the instalment due will reflect as a negative indicator on your payment profile. This negative information will affect credit scores.

Contact your credit provider immediately if you are unable to pay the minimum instalment due.
Apply for debt counselling if you are unable to service your debts monthly. The following article will explain Debt Counselling or if you need assistance with debt counselling you may consult the following page GET DEBT HELP
Never ignore telephone calls from credit providers and collection agencies.
Regularly inspect your credit report. Dispute any inaccurate information with all the bureaus. For more information on Credit Clearance please click on the link.

**What to do if you have been “blacklisted” or have an impaired credit record.**

If you know that you have been "blacklisted" or got rejected for credit facilities, you should understand that thousands of credit applications get declined each month. The most crucial factor after getting declined is to establish the reason for the rejection.

Step 1 – Speak to the credit provider who rejected your application.

Enquire with the credit provider because your finance application got declined. The credit provider will state to you any of the following reasons.

Low Credit Score. We have included a couple of interesting self-help articles to assist with credit score improvements
- Help me rebuild my Credit score with Credit bureau Clearance.
- Ultimate Credit Score Guide - 2020
Affordability failed.
Adverse historical payment profile.
- Credit Clearance in South Africa
- Blacklisted
Debt counselling indicator. To cancel debt review read the following article:
- How to cancel Debt review and Debt counselling!

Step 2 – Stay calm if you have been “blacklisted”.

It is vital to stay calm and consult your credit report after a rejection. Applying with a different credit provider without fixing the problem is not a good idea. This extra application will result in your credit score getting penalized. Applying for many credit applications in a short period will damage a credit score.

Once you make a credit application, this enquiry will be recorded on your credit report. Prospective credit providers will assume that many applications, in a brief period is a sign that you are desperately seeking credit. Credit providers avoid granting credit when this danger sign is present.

Step 3 – Check your credit report if you have been “blacklisted”.

Should the credit provider who rejected your credit application tell you to investigate your bureau report to stay calm as advised above? Refrain from applying for credit again with a different credit provider.

Before doing anything else, consult your credit report. Every credit-active consumer has a credit report. A credit report is a record of your details which includes a payment profile of how you have been conducting past and present accounts.

Prospective registered credit providers will have access to your credit report with your consent. Credit providers will do an in-depth assessment of your credit report to predict how likely you are to repay the debt.

Contact Us to get an affordable four in one credit report from all major credit bureaus. Purchasing this report will make the process of establishing if you have been “blacklisted” easier. Our four in one credit report includes your credit reports from Transunion, Experian, XDS and Compuscan. Having this complete report will give you the power to check adverse, payment histories and enquiries all in one easy to read a Credit report.

Step 4 – Know your debt-to-income ratio

Another reason a credit provider will decline a credit application is if debt levels are too high. This rejection does not mean that you have been blacklisted. Registered credit providers will scrutinize outstanding debts. A high debt to income ratio will ring alarm bells for credit providers. A credit application will get declined if a net salary is close to monthly debt commitments. In the following example, we will illustrate this scenario.

John is working for a mine and has a net income of R15 000pm. He wants to buy a car as his employment contract requires shift work and public transport is not available when he is working night shifts. John already has unsecured debts totaling R125 000. The total repayment of his unsecured debts amounts to R8 000pm. John has never defaulted on any of his accounts and has a good credit score. The new vehicle instalment will be R3 500. Johns' application will get declined as his debt to income is too high even though he is not blacklisted. Credit providers will be hesitant to approve an application where more than 50% of credit limits have been used.

Where possible ensure that your debt-to-income ratios are kept as low as possible. Keeping an eye on your debt-to-income ratio will ensure that you will not fall into the dreaded debt trap in future.

Step 5 – No Credit history does not mean you have been blacklisted.

Application for new credit will be hard to get if there is no current credit history on file. Credit providers will use historical information to assess how likely you are to repay the debt. If there are no history credit providers will be unable to establish if you can repay a new credit facility. This lack of information will increase your chances of getting the application declined. This rejection does not mean that you have been blacklisted.

To start building a credit history is to start with smaller clothing accounts. Open one account and repay the account well for a couple of months before applying for credit again.

Start working on your profile and avoid blacklisting.

Impaired credit records are a real problem in South Africa which is currently suffered by more than half of the consumers in South Africa. The adverse information ranges from judgements, enforcement action defaults, administration orders, sequestrations orders. This information includes struggling consumers who were four months or more in arrears. These consumers are not regarded as being blacklisted but are likely to default on future credit agreements.

At Credit Salvage, we assist blacklisted consumers with impaired credit records with a range of services, Credit Clearance, Debt Counselling and numerous other services. Contact us today, and we will analyze and advise on the best plan of action for your situation.

Frequently asked questions - Regarding being Blacklisted

In arrears, what does this mean?

Your credit record will show that you skipped a payment if you fail to make your monthly payments or underpay your account. Your payment history will reflect the amount you are behind as arrears. Your credit score will be severely affected by this.

Tip:It is imperative that the arrears amount gets settled as soon as possible to avoid any further credit problems and credit application rejections. If you pay off the arrears within two or three months, you will be able to see a massive improvement in your credit score. You will see remarkable results in your score later if you make short-term budget sacrifices to settle any arrears you owe.

What is a default Judgment?

When soft collections to collect outstanding debt from you fail, a default judgment is a legal process to recover the overdue debt through the help of the courts. The chances of obtaining future credit are unlikely if you have a judgment against your name, as credit providers will view a judgment as a red flag.

To remove a magistrate's court judgment, you only need a paid-up letter from the credit provider or the collection attorney. It is a legal requirement that the creditor provides you with a letter confirming the payment of the judgment.

What does black listed mean?

A blacklisted consumer has negative credit information on their credit profile. This happens because of poor credit behavior. Missing payments, defaulting on accounts, and being under debt review are all bad for credit scores. This term isn't used in law or credit reports. But, it implies a low credit score, and that the person is a risky borrower.

Getting a car, house, loan, or credit card is hard if you're blacklisted. This is also true for if you are looking to rent property. Adverse credit events cause negative listings. They are reported to credit bureaus like TransUnion, Experian, or Compuscan. These bureaus keep detailed records of an individual's credit history.
Here are some key points about blacklisting in South Africa:
1. Blacklisting lowers credit scores, which are numerical representations of an individual's creditworthiness. Credit providers use this score to assess risk. They use it to approve or decline credit facilities.
2. Many things lead to blacklisting, like defaulting on loans, overdue payments, and judgments. It depends on the type of adverse listing, but these bad listings stick around for a while. Please visit our blog article. It covers the retention periods for different adverse listings.
3. If you apply for debt review to manage unmanageable debt, you could get blacklisted. This process is intended to assist people in repaying their debts, but it still impacts your credit score until the debt review is completed.
4. Blacklisted consumers will have trouble getting credit. If the credit provider grants you credit even with a low score, it usually comes with a higher interest rate.
5. If you want your name cleared, contact us today. We offer professional help in removing and updating adverse information from all bureaus.

Conclusion

It is important to remember that even though being blacklisted by a credit bureau may seem overwhelming, you have the power to overcome the financial mistakes you have made. It is possible to gradually rebuild your financial standing and regain control of your financial future by understanding the reason for blacklisting, creating a budget, communicating with creditors, considering debt consolidation, improving your credit score, and seeking professional help if necessary. Maintain disciplined financial habits and remain committed to your goals, and you will overcome the challenges posed by being blacklisted by a credit bureau.

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