October 31, 2019//-Of the 11.3 million credit applications submitted in South Africa during the second quarter of 2019, more than 6 million were rejected.
The Consumer Credit Market Report highlights how 55% of credit applications were unsuccessful due to applicants not meeting the affordability criteria. However, there are plenty of other factors that contribute to the high number of credit rejections that South Africans are receiving.
Lack of employment
Unemployment in South Africa is currently at its worse rate in more than a decade, with latest figures revealing that 29.1% of the nation are out of work.
The majority of lenders will automatically refuse an application for credit from an unemployed person as they are bound by the National Credit Act 2005 which stipulates that the applicant must have the ability to repay the money they’ve borrowed. Unfortunately, this has resulted in 5.6 million unsecured loans with high-interest rates being taking out.
Poor credit score
A credit score of 600 or above is considered ‘good’ in South Africa and provides borrowers with the opportunity to obtain credit at a favourable interest rate. However, the lower an individual’s credit score, the less likely they are to qualify as they are deemed as too much of a risk.
Situations can arise where a person’s credit rating is wrongly marked by a creditor and this can lead to their credit score dropping to a level deemed as ‘poor’. At times like this, action should be taken to repair the credit score as soon as possible to ensure that future applications for credit aren’t rejected.
No bank account
32% of South Africans don’t currently have a bank account. Applicants in this situation are unable to prove that they have a regular income and this can trigger alarm bells with creditors.
On the plus side, this is easily rectified. South Africans considering applying for a loan should apply for a bank account and ensure their employer pays their wages into it. Alternatively, some lenders will be satisfied when the applicant submits paper copies of their payslips as part of the application process.
A high number of South Africans are being rejected for credit. In most cases, these individuals simply don’t have the appropriate measures in place to be approved, such as a bank account or a job.
However, there are times when factors out of their control lead to them being declined, and it’s in these circumstances where action should be swiftly taken.
African Eye Report
