Securing a home loan is a challenging process on its own, especially so after undergoing debt counselling. Debt rehabilitation reflects on your credit profile for some time even after having paid up all your debts and being issued a clearance certificate by the court. Although your debt councilor should forward the clearance certificate to the various credit bureaus for the status to be updated, you as the individual should ensure that all bureaus have been updated prior to applying for home finance.
It’s highly unlikely that any credit provider would extend credit to a blacklisted individual. You are considered a high risk. Being blacklisted applies to a number of financial situations, like having your account in arrears or having a judgement brought against you.
How do you get blacklisted?- Having accounts in arrears: This is due to falling behind on your payments and it will reflect on your credit profile for at least two years.
- Having a default brought against you: There are two types of defaults:
a) An enforcement default where enforcement action is taken such as bad debt written off or handed over, credit card revoked or repossession of goods takes place;
b) and subjective default which entails the classifications of consumer behaviour resulting from delinquency, slow payments, absconding or not being contactable. Enforcement defaults will reflect on your profile for two years or until the account is brought up to date. Subjective defaults will reflect on your profile for one year or until the account is brought up to date.
- Having a judgement brought against you: A judgement is a legal action issued by the court and is difficult to rescind. Normally a judgment issued by a magistrate is for debt under R100 000, while an amount exceeding R100 000 is handled by the High Court in South Africa. Even if the judgement gets rescinded, this will remain on your credit profile for five years.
How Does Being Blacklisted Affect a Home Loan?Falling behind on your repayments reflects negatively on your credit profile. When you apply for a home loan, the credit provider runs a background check on the credit bureau system to check your payment credibility. Being blacklisted has a negative effect on your credit profile and classes you as “high risk”. It’s highly unlikely for a credit provider to grant you a home loan under these circumstances.
Tips on Avoiding a Negative Credit Profile:- Keep your account payments up to date
- Make sure to honour your repayment arrangements
- Should you be unable to honour a payment agreement, be sure to let your creditors know and make alternative arrangements as soon as possible
- Don’t take on more than you can handle financially
- Keep to a strict monthly budget
Contact Intro Real Estate for more advice on how to put your best foot forward when applying for a home loan.
Intro Real Estate, it’s the right choice.
