Consumers’ credit scores will be impacted due to coronavirus
Thousands of South African consumers’ credit scores will be impacted in the coming months as more and more people lose their jobs or receive reduced salaries.
Financial advisors say consumers should start taking stock of their finances and look at their current credit scores to make proper arrangements with their financial institutions.
A credit score is a three-digit number that helps lenders evaluate how safe or risky you are as a customer.
There have been calls from industry experts for consumers who cannot fulfil their payment arrangements to be given amnesty during the COVID- 19 crisis.
Experts say something as simple as cancelling your insurance or defaulting on premiums could impair your credit score.
Personal finance coach, Nthabiseng Monoge, shares tips on how you can keep a clean credit score during this time.
“If you are intending to apply for some of the debt relief measures that have been put out by the banks you need to be prepared. One of the first things is to make sure that your credit report is clean. There are sites where you can get your report for free. And if there is incorrect information you can dispute it. If there are small debts that you can settle please do that and prepare a household budget.”
Banking institutions and other lending institutions have made several relief measures available, aimed at helping consumers during this time. These include payment holidays and deferrals.
Magauta Mphahlele of Ithuseng Credit Solutions advises consumers not to go credit shopping at this time and save as much as they can.
“If you’re experiencing financial problems and that’s the reason why you are unable to pay your bills on time, speak to you’re service providers and see if they can offer you a payment holiday or negotiate a payment plan. Keep the balance of your credit as low as possible, the target is 30 % so that means if your credit is R1000 your balance on the credit card should be R300. This will help you improve your credit score.”
It is still not known when National Credit Amendment Bill signed into law in 2019 will come into effect. The law will set the groundwork for over-indebted consumers to have payments suspended, in part or full, for as long as 24 months.
The bill was opposed by the banking industry and clothing retailers who provide credit. They said it would drive up the cost of loans for low-income earners, restrict lending and encourage bad behaviour from borrowers.
Local banks give consumers debt payment relief for at least 3-months.
South Africa’s banks launched a payment relief programme at the end of March aimed at helping consumers who would have been adversely affected by the COVID-19 pandemic, through job losses or pay cuts.
Businesses were also part of the programme.
Standard Bank’s head of personal and business banking, Funeka Montjane, has urged those with mortgages to act early to find a solution.
“To our customers who have mortgages we say we understand, some people are going to get paid, some have savings, those who can’t we have sent them messages that say call us and we will do a personalised solution for you. In 2010 we found ourselves with about 15% of our customers who are unable to pay their mortgages for three or more months. We simply asked them to call us and we were able to restructure and make plans. For 99% of them, they kept to those agreements. There are many things that we can do, but the most important thing is don’t keep quiet, speak early, we’ll find a solution together,” says Montjane.
To lighten the load and pressure for small business owners, we are giving our customers with a turnover of less than R20m a 3 month payment holiday, effective 1 April 2020.
Visit https://t.co/eNry8jjIB4 for more information #BankFromAnywhere pic.twitter.com/aNZ5prL8se— StandardBankZA (@StandardBankZA) March 22, 2020
Absa says it has managed to help more 370 000 account holders, amounting to almost R6 billion in cash-flow relief over three months.
In the video below, CFO for Absa Retail and Business Banking in South Africa, Punki Modise, spoke to SABC News about the programme.
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Source: SABC News (sabcnews.com)
