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How Debt Review Affects My Credit Score

Questions & AnswersCategory: Debt ReviewHow Debt Review Affects My Credit Score
Anonza asked 2 months ago

Hi,

Would like to be enlightened on how going under debt counselling/review will affect my credit score? I am currently over-indebted and know what I need to do to settle my debt but most of my debt has a high-interest rate, such is life. I understand the process of debt counselling/review but why must I be flagged for wanting to clear my name or pay off my debt? And why do the credit bureau take so long to align your records when you have settled your debt. Lastly is it possible to apply for a home loan whilst on debt counselling/review or would I have to wait up until my current debt is paid off, wait for the certificate of clearance then wait the further 3-6 months to be able to apply for a home loan?

1 Answers
Carien Kruger Staff answered 2 months ago

Good day,

Thank you for getting in touch.

When you are under Debt Review it is listed on your credit record as such. This is to prevent reckless credit and fraud during the Debt Review program. 

The listing will be removed from your record once a Clearance Certificate is issued. Which means, by the end of a successful Debt Review program you will have a healthy, clear credit record. 

You will not be able to get a home loan during debt review. The National Credit Act prohibits you from incurring any further credit while you are under debt review. Which makes sense since credit is what caused most of our clients’ debt. The reason for this is that whilst under debt review your budget is calculated and precisely allocated to your current debt obligations and other living expenses. If you manage to get credit while you are under debt review it will most definitely be interpreted as reckless credit. 

In theory, you should be able to apply for credit again within a week of receiving your Clearance Certificate. In our experience though, the latter is not true. Credit Bureaus take longer than that to get your record cleared (we don’t know why). Pull your credit report about one month after you have been issued with the Clearance Certificate. Check your credit score and payment history. If there are any discrepancies, take it up with the credit bureau or your debt counsellor. We would suggest that you make sure your credit profile and credit score is good before applying for new credit. 

Kind regards.