There is often a misconception in the market as to what the function of a credit bureaus is. Credit bureaus are meant to assist consumers getting access to credit and in not becoming overindebted and assist credit grantors in assessing the risk on their lending decisions. Credit bureaus collect and aggregate data from various parties to enable them to create a credit score or risk score. The more data consumers give bureaus access to the more accurate this risk assessment becomes. A credit grantor is not only a bank or a lending institution but can also be a retailer or other company granting a consumer any form of credit.

Credit bureaus use several variables to calculate a consumer’s credit score and there are different scoring models in the market, but the most recognized credit score is the FICO score which uses the following categories when calculating a credit score:

  • Payment history (35% of your credit score)

    A consumers payment history shows if they have paid their accounts timeously over the length of their credit. This is the most important factor when calculating the credit score. The amount of time lapsed after the account was due when defaulting on a payment also plays a role in how much the score is adjusted by.


  • Amounts owed (30% of your credit score)

    The amount of debt a consumer has is less important than their credit utilization when determining the credit score. The amounts owed category looks at different factors when calculating the score and using a low percentage of the credit available to a consumer can have a more positive impact on their credit score than using none of the credit available to them.


  • Length of credit history (15% of your credit score)

    Having a longer credit history is usually beneficial, but not required for a good score. The length of time a consumer has had accounts, when they were opened and when they were last used are some of the factors considered in this category.


  • Credit Mix (10% of your credit score)

    FICO scores will take the different types of accounts consumers have into consideration. Here the ability to manage different types of accounts is measured. An example of the different accounts are credit card accounts, retail accounts, installment loans and mortgage loans. A consumer does not have to have one of each type of account though. study


  • New Credit (10% of your credit score)

    Studies have shown that when consumers open lots of accounts over a short period of time it increases the risk of defaulting on payments and thus this could negatively impact your credit score. When opening new accounts that diversify your “credit mix” it can also increase a score over time as it shows a consumer can manage different type of accounts.

A FICO® score is a particular brand of credit score.


A credit score is a number that is used to predict how likely you are to pay back a loan on time. Credit scores are used by companies to make decisions such as whether to offer you a mortgage or a credit card. They are also used to determine the interest rate you receive on a loan or credit card, and the credit limit.


FICO stands for the Fair Isaac Corporation. FICO was a pioneer in developing a method for calculating credit scores based on information collected by credit reporting agencies. Today, other companies also have credit scoring formulas (“models”), but most lenders still use FICO scores when deciding whether to offer you a loan or credit card, and in setting the rate and terms. Banks may also use FICO scores when approving checking and savings account applications and setting the terms of those accounts.

Your credit score is an overview of your borrowing history. That means that your credit report will only include loan queries, applications, repayments, outstanding credit balances, and judgements made against your name. Your credit score will not include reference to your own bank account or any investments in your name not made through a credit purchase like a home loan etc.


If you have surplus income at the end of the month, a healthy savings account, or a number of different profit-producing investments, your credit score can still be low if you have not previously applied for credit. This is why it’s sometimes said that taking out a loan or having a credit card you use often and repaying it timeously can often increase your credit score.


Having a low credit score may not necessarily see you declined for credit outright though. In many cases, reputable lenders will ask to see that you have a regular income and sufficient available income to cover the repayments on your chosen loan amount and term. If you have surplus income, have no judgements in your name, and don’t often find yourself short of money, this can influence a lender’s decision to give you access to credit even if your credit score is low.

In South Africa, debt review, also known as debt counselling, is a formal debt relief process designed to help over-indebted individuals manage their debt more effectively and avoid legal actions from creditors. It is regulated by the National Credit Act (NCA) and is intended to provide a structured way for consumers to repay their debts while protecting them from legal actions such as repossession or garnishment. The National Credit Regulator (NCR) maintains a database with all the individuals under debt review. They also handle debt counselling complaints and can be contacted on dccomplaints@ncr.org.za

Here's how the debt review process works in South Africa:

  1. Application: An individual applies for debt review through a registered debt counsellor. The counsellor evaluates the individual's financial situation, including their income, expenses, and outstanding debts.
  2. Affordability Assessment: The debt counsellor assesses whether the individual is over-indebted, which means they are unable to meet their financial obligations. If the assessment confirms over-indebtedness, the counsellor proposes a debt repayment plan.
  3. Payment Plan: The debt counsellor negotiates with creditors to create a consolidated repayment plan. This plan typically extends the repayment term and reduces the monthly instalment to an amount the individual can afford.
  4. Court Application: Once the repayment plan is agreed upon by the debtor and the creditors, the debt counsellor submits the plan to a magistrate's court for approval. This legal step protects the individual from legal actions by creditors during the review process.
  5. Distribution of Payments: The individual makes a single monthly payment to a Payment Distribution Agency (PDA), which then distributes the funds to the various creditors according to the agreed-upon plan.
  6. Debt Review Flag: During the debt review process, the individual's credit report is flagged to indicate their participation in the program. This flag remains until all debts under the review are fully settled.


Getting out of debt review in South Africa:

  1. Completion of Repayment Plan: The individual completes the repayment plan by making all the required payments to creditors. Once all debts included in the debt review are settled, the counselor will issue a clearance certificate.
  2. Clearance Certificate: The clearance certificate is sent to all creditors and credit bureaus, indicating that the individual's debts have been settled as per the repayment plan.
  3. Credit Bureau Removal: Credit bureaus are informed of the completion of the debt review by the NCR, and the individual's credit record is updated to remove the debt review flag.
  4. Financial Rehabilitation: After obtaining the clearance certificate, individuals can begin rebuilding their credit history. They can access credit and loans, but they must manage their finances responsibly to avoid future debt problems.

It's important to note that debt review is a legally binding process in South Africa, and individuals must adhere to the repayment plan. Exiting the process prematurely or failing to make payments could result in creditors resuming legal actions. If you are considering debt review or need advice on your specific financial situation, it's recommended to consult a registered debt counsellor or financial advisor for guidance tailored to your circumstances.

Further information can be found here: https://www.ncr.org.za/images/Public%20Notices/Debt%20Counselling%20Explained%20Advert.pdf

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