How credit is used by employers and lenders

Watch out! This credit card swipe may end your employment chances of that new job you applied for!

A staggering 58% of unemployed people are between the ages of 15-34- which is scary, but even more shocking was the behaviour patterns these 15 to 34 years olds follow. 

Young people are opening accounts from as young as 18 years of age, which shows they understand the banking system and that is a positive for society and the banks. Unfortunately this positive is severely impacted by them using credit to fund their lifestyles!

Credit scores

Constant overspending leads to a poor credit score. A credit score is based on how many accounts and credit cards a person has opened, the total value of their debt and how they repay the debt.  Credit bureaus hold both positive and negative data, the combination is used to give a credit profile. A credit profile is a “snapshot” of how risky a person appears to be at any particular point in time.  A bad payment history of credit results in a process called blacklisting by the Credit Bureau. To be blacklisted means that there is a track record of not paying accounts and meeting financial obligations. Blacklisting impacts on the employment prospects of those people.

Recruitment process

Prospective employers will often check credit profiles as part of the recruitment process.  A bad credit history indicates untrustworthiness or a bad discipline on the part of the future employee and could lead to the prospective employer deciding to move on to another employee candidate.

Time periods

A credit profile is tainted with the blacklisting for at least two years if the credit debt is paid up and as long as five years if there is a judgement. Outstanding judgements are moved from the credit profile in five years, but the debt obligation remains in place for thirty years

Judgements

A judgment is very serious as it is a legal action and it is difficult to reverse. Judgments for amounts under R100 000 are usually issued by the magistrates’ court and these can be rescinded if you pay off the debt.

Rescinded means the creditor must need to not only produce a paid up letter from either the original credit provider, but also has a letter from the credit provider stating that they agree to the judgment being rescinded. Credit providers do not like giving such permissions and will often refuse to provide the letter. The judgement record on the credit profile will still remain, but will state the judgement was rescinded.

How do you protect your future employment prospects?

SA’s credit bureau are compelled to provide consumers with one free check a year. Use this option by going onto the websites such as https://transunion.co.za/.  Scroll down to the ‘About us ‘section and click on the Free Credit Report. https://www.experian.co.za has this function under Consumer Services

So what should you do if you have a problem?

Contact your lenders if you have a problem, before it becomes a real problem. Ignoring the situation will only add to your problems. Pay your bills on time. If you have an overdue bill, an unpaid debt, pay it off. Set up a budget, and live within it. Your employment status depends on it!

Hoping the problem of unpaid bills will go away is never an intelligent solution to the problem. It’s not just your future lending ability that will be affected by bad credit history, but your very livelihood. Can you afford to still be spending?