In South Africa, credit checks are essential to the lending and financial system. Credit checks are conducted by credit bureaus or credit reporting agencies that collect and maintain information about individuals’ financial behaviour.
When a credit check is done on you it could be for the following reasons:
- Bank Applications: When applying for a mortgage, loan, or any other type of credit facility, lenders typically conduct credit checks to assess the risk of lending money by reviewing the applicant’s credit history, including their payment history, outstanding debts, and any judgements or defaults.
- Rental Applications: Landlords often run credit checks on prospective tenants to assess their ability to pay rent consistently and on time. A favourable credit history can increase the chances of being approved for a rental property, while an adverse credit history may lead to rejection or require a higher deposit.
- Employee Screening: It is highly recommended that employers conduct credit checks for any position involving financial management, accounting, or access to sensitive financial information. Credit checks help employers evaluate an applicant’s financial responsibility and trustworthiness level. Organisations require the applicant’s consent to perform a credit check.
- Insurance Applications: Some insurance companies may consider an individual’s credit history when calculating premiums for insurance coverage. They believe that credit history can indicate a person’s level of risk and responsibility, affecting the pricing of insurance policies.
- Compliance with Regulations: Credit checks are also essential for compliance with regulations such as the National Credit Act (NCA) in South Africa. The NCA regulates credit reporting and promotes responsible lending practices by ensuring lenders assess borrowers’ ability to repay loans.
iFacts Statistics 2022