Is blacklisting a myth?
Most South African’s think blacklisting is literal.
Not knowing how credit bureaus, the credit system and credit reports operate is the problem at hand.
We imagine a LIST with names of the people who poorly manage their credit or do not deserve any when we hear blacklist.
Where does the term originate?
According to Experian “Blacklist” is a misleading term, a category that dates back to when credit bureaus only kept negative information.
Above all, credit bureaus would mark individuals down as a risk and limit access to finances because of negative credit behaviour.
Therefore resulting in information such as defaulting on payments, missing court judgements and any accounts being in arrears being under your profile.
Wikipedia explains blacklisting as the action of a group or authority, compiling a blacklist of people, countries or other entities to be avoided or distrusted as not being acceptable to those making a list.
However, a blacklist can list people to be discriminated against, refused employment, or censored.
Breaking down the Credit Report
On the other hand, a credit report is your financial history diary.
It gives insight on how well you pay off debt and influences whether or not you’re eligible for more.
Consequently, credit and service providers use the information in your credit report as an essential contribution to the development of their credit risk score, along with your employment history, your income and affordability assessments. Alongside the type of credit for which you are applying may affect the outcome of your credit application. TransUnion
As a result, knowing the information that’s in your credit report is more valuable than knowing your credit score.
Credit providers care more for your credit report because of the depth it carries compared to the credit score.
What is a credit score?
That is to say, credit bureaus calculate the credit score using data from your credit report: the score ranges from 0 to 999.
The higher your score, the better, it means you have a strong credit history. A lower rating equals to lenders less likely to offering you credit.
The credit score metric system:
- EXCELLENT: 767–999
- GOOD: 681–766
- FAVOURABLE: 614–680
- AVERAGE: 583 – 613
- BELOW AVERAGE: 527–582
- UNFAVOURABLE: 487–526
- POOR: 0 – 486
In addition, when creditors reject your application, it doesn’t always mean that you have a low credit score.
It may be that you don’t meet the specific criteria to gain the credit offered.
They often highlight the negative because of its implications towards your credit viability.
Here are some repercussions of being a terrible payer:
Court issues an instruction for you to pay an outstanding amount
Default Information: Behavioural
Slow payer or account misconduct under your profile.
Your complaint query on your credit report is determined as accurate by the credit bureau; they will reject your complaint.
So, Can I be blacklisted?
In conclusion, there’s no such thing as blacklisting!
But creditors do stay clear of you if your credit score is too low. And if your report carries more negative information than positive.
Fortunately, there isn’t a list that puts you in the naughty corner.
To clarify if you have an unfavourable credit score, you can improve your score and adapt a financial plan that can get you out of debt.
Times have changed, and credit bureaus now keep both positive and negative information.
Giving lenders a true reflection of your credit profile.