A history of prompt payment on outstanding debt sums up a good credit record. While providing every power to buy or rent, it also creates greater leverage with which to negotiate the most favourable mortgage loan rate or rental contract.
Credit experts always tell potential property owners or new tenants that outstanding debt and a poor payment history remain on public record. While the recently approved “Removal of Adverse Credit Information Project” by the Department of Trade and Industry aims at assisting those who have paid their outstanding debts, consumers remain liable to meet obligations in respect of any credit agreement. The revised National Credit Act also seeks to empower consumers who can afford credit with the required administrative support to gain greater access to employment and the resulting increased affordability of a home.
Solid credit behaviour remains the single most treasured financial asset potential homeowners and tenants will ever hold, say banks and credit experts. Tim Akinnusi from Nedbank Home Loans says: “One of the three most important factors which influence a home loan application is a good credit profile.” He says a healthy credit record provides a better rating for optimum consideration during the entire application process. Most importantly, say rental agents however, is that consumers know that personal credit history held in the public domain is in fact correct. Consumers are empowered by the knowledge that mortgage lenders and landlords, who access consumer credit records through professional and registered credit bureaus such as TPN, are in possession of the most current and credible information.
In addition to qualifying for credit when most needed, potential candidates also increase the leverage needed to conclude the best financial deal, both in the short- and the long-term. Increasingly, SA’s mortgage lenders regard clean credit slates of applicants as enough reason to negotiate the best possible interest rate on a mortgage loan. The same principle applies when tenants in good standing set out to negotiate the annual inflationary increases on long-term leases with their landlords.
Natasha Herbst of Trafalgar Property Managers in Pretoria, specialists in home letting and financial services, says: “Trafalgar goes out of its way to clarify the credit records of potential tenants, which is obtained from bureaus such as ITC, with our clients and individual applicants.” She says the most important reason is that landlords view the applications of tenants with scrupulous payment records, in a very different light, both prior to agreements and during future negotiations.
The same principle applies when potential home buyers initiate applications to enter the property market. Bruce Swain, CEO of Leapfrog Properties confirms that the revised credit act aims to remove negative credit records, specifically in cases where payments of outstanding debts have been recorded. However, he says that the payment profile of a buyer or tenant remains available for the scrutiny of potential credit providers, even after the removal of paid up judgements has taken place. Swain says it is likely that short term lenders of unsecured loans may derive the greatest benefit from the amended act, and that some positive impact on potential buyers in the new and affordable markets may take place.
Also on the cards awaiting potential credit consumers, are improved affordability tests to be conducted by credit providers, aimed at greater consistency in the process of reducing reckless lending, and over indebted consumers.