DebtSafe Blog

South Africans Unaware of the State of Their Credit Profiles

The recent amendments in the National Credit Act (NCA) will make it more difficult for consumers to turn to unsecured lenders when short on cash. With stricter structures for affordability assessments by lenders put in place, it has never been more important for South Africans to maintain a good credit standing. Yet, a worrying amount of South Africans are currently unaware of the state of their personal credit profile and the importance of maintaining a good credit standing.

DebtSafe recently carried out a ‘Facing your debt head-on’ survey, completed by more than two thousand individuals. The survey, which was held to gain a better understanding of consumers’ financial experiences, revealed interesting and somewhat unsettling insights. One finding stood out in particular, which is a cause for concern. Just under half of the respondents indicated that they are not aware of the state of their credit profile – with 9% having no idea what a credit profile is it all.

In addition, about a third of respondents stated that they do not know how much debt they have in total against their name. These results highlight the significant need for debt education among South Africans. To fully understand your financial position and move forward, it’s crucial to have a thorough knowledge of how much debt you owe. Keeping track of your current credit status will encourage you to be more responsible about the debt you incur.

Other findings from the survey show that more than half of respondents do not have a savings plan in place, while 38% have no savings at all. A small amount of planning and saving can go a long way. From assisting with planned purchases to preparedness for unexpected costs. Unfortunately, a massive 67% of respondents do not have an emergency savings fund in place. A dangerous consequence of this is that cash strapped consumers often turn to other means of acquiring money when unforeseen expenses arise. Taking out either unsecured loans or further exhausting their credit facilities, which can further entrench them in the negative cycle of indebtedness. This is impounded by the often extremely high-interest rates attached to unsecured loans. Contributing significantly to the difficulty of meeting the subsequent repayment obligations.

The survey’s findings highlight the need for advocating a savings culture in South Africa, as part of overall basic financial education. There are a number of educational and practical tools available to the public to assist with finance management. Such as our free DebtSafe Budget Template. We urge individuals to make use of these types of resources.

There is an undeniable issue of over-indebtedness in South Africa. 57.8% of the population is categorised as negligent in their debt payment behaviour. This behaviour can have serious consequences on an individual’s financial well-being and access to financial resources.  The findings from this survey highlight the importance of not only spending responsibly and saving but also the absolute necessity of maintaining a good credit standing.

Considering the stricter structures now in place through the NCA amendments, borrowing cash will become more difficult for consumers, but keeping up with your payments – which just under half of the respondents claim to do – will act in your favour and help you maintain a good credit standing.