In this article, we explain what happens after debt review, answer the most frequent questions about life after debt review, and tips on how to build a good credit score after debt review.
Your credit score will be impacted by debt review, but it’s nothing to be concerned about. All credit bureaus will flag that you are under debt review debt. This will stop you from taking on additional debt until you have paid off all of your current debt obligations.
However once you’ve completed the debt review process and you’ve received your clearance certificate from a debt counsellor, your credit score will be set back to zero. You will have a fresh start at rebuilding a healthy credit score.
When you undergo a debt review, what happens to your credit profile?
You will be flagged as overindebted and a debt review applicant by the credit bureaus when you undergo debt review. As the primary goal of debt review is to assist you in paying off the existing debt, this precludes you from obtaining any additional credit.
A debt counselor will give a clearance certificate once the debt review procedure is finished. The debt review flag will be removed, and your credit score will be reset to 0.
What Happens After Debt Review?
Once the debt review process is completed, a debt counsellor will issue a clearance certificate also known as form 19 (This will be used to remove the debt review flag from your credit report). The Debt Counsellor will also update the NCR debt help system and send notifications to all relevant registered credit bureas.
How long does it take to get a debt review clearance certificate?
Your clearance certificate will be issued immediately after the debt counsellor has verified that all accounts have been paid up or when you are eligible for the Form 19. Thereafter the debt counsellor will have seven days to submit the clearance certificate to the credit bureaus and update to update the NCR DHS to clear your record.
The credit bureaus themselves also have seven days to remove the debt review flag from your record and update on their end that your debt review case is closed. The whole process, therefore, should take about 21 days to complete.
How can I get a Debt Review Clearance Certificate?
You can easily obtain your debt review clearance certificate from your current debt counsellor once you have paid up all of your accounts (or paid-up all accounts except your bond).
Should you want to apply for a clearance certificate with us, please take note of the following;
- Make sure that you have all paid up letters.
- Make sure you have all prescription letters (if your accounts are prescribed)
- Complete transfer letter.
- Make sure you have other supporting documents to prove your case.
How much is the Debt Review Clearance Certificate?
The current NCR Fee Guidelines do not specify the clearance certificate fee. However, the advice we have received from the regulator is that a debt counsellor can only charge a maximum of R450.00 vat excl for the clearance certificate, depending on how much aftercare you owe.
How long after debt review can I apply for credit?
We suggest 3 months. Try to build a solid credit profile and only apply for necessary credit.
What happens if your debt review is terminated?
Section 88 (3), provides that a creditor may not take legal action to enforce a credit agreement if the consumer has already applied for debt review and the application has been accepted and the consumer has been declared over-indebted.
This provision only applies while the consumer is under debt review.
As soon as the consumer’s debt review is terminated, creditors have the right to take legal action to enforce a credit agreement that was previously subject to debt review, typically calling upon the consumer to settle any arrears that may have accumulated on the account and reverting to the original initial contractual repayment amount.
How to build a good credit score after Debt Review?
Living without debt is great – many people prefer that, especially now during these difficult times. However, if you plan on buying a house or a car in the near future, you’re going to need a good credit score if you’ll need credit to finance those goals. It’s important for lenders to see a history of how you have successfully managed debt. So how do you start building your credit rating from the ground up? Here are some ways to get you started.
- Pay your rent, water, and lights on time
While your water and light accounts don’t show on your credit report, your service providers will turn your account over to collection companies when you default on making payments. This will impact negatively on your credit rating. To avoid this, pay your bills on time. Having a good history of timely payments will help you to establish a good credit record.
- Open a bank account
Managing your bank account well is a good indicator of your financial responsibility, which goes a long way in establishing a good credit history. If there’s an overdraft facility, you will benefit from activating that too, within limits. A good rule of thumb is to use no more than 25% of the available overdraft limit and pay what you owe quickly.
- Get a credit card
One of the easiest ways to build your credit history is by getting a credit card or even a retail store account card. Then, use this card or account to make small purchases and repay the money at the end of the month. Remember to pay it back in a timely manner and keep your credit balance below 35% of your credit limit.
- Go slow with credit applications
While you need credit to build credit, it’s important to take it slow. Having too many credit applications in a short period of time might do more harm than good for your credit-building efforts. This shows lenders that you’re desperate and could be susceptible to getting in way over your head with debt.
- Monitor your credit report
Your credit report isn’t only useful for checking your credit score. It can be the first indicator of identity fraud that has taken place using your personal information. By regularly going through it, you can pick up signs of fraud, incorrect information or judgments against you, and work on fixing these. The quicker you pick these up, the quicker they can be resolved.
While these steps can help to build a good credit rating from the ground up, you need to adopt some good financial habits to keep your score from dropping. These habits include:
- Never miss your payments.
- Avoid making late payments on your credit accounts.
- Don’t use too much of the credit available on your credit accounts.
- Don’t have too much debt (should not be higher than your income).
Building up your credit score will take time. By practicing sound financial habits, you’ll reap the benefits in the future when you need credit most.
Can I exit debt review if I am still owing some accounts?
You can exit debt review if you are no longer over-indebted and there is no debt review court order in place. Learn more about Debt Review Removal Here.
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