Tips On How To Manage Your Credit Record During & After The Corona Lockdown Period

According to Lucid there are 3 things you can do the protect your credit record during the next few months - given the current economic lockdown situation we are experiencing.

1. Banks offering 3 month repayment holidays

All banks have responded to the COVID 19 lock-down, by offering clients a 3 month reprieve on their monthly repayments.

How this affects your credit profile and score

Banks report repayment information to the credit bureaus monthly. This information reflects on your credit profile and directly impacts your credit score.

Over the next 3 months, banks should be reporting that your monthly repayments are up to date, notwithstanding you not making any repayments. This will then not negatively impact your credit profile and credit score.

Three months arrears will have a devastating impact on your credit profile and credit score. You could lose as much a 100-150 points on your credit score. While it only takes 3 months to ruin your credit score, it can take up to 12 months to fix/improve this.

It is therefore imperative for you to check your credit reports regularly over this period, to ensure that banks are not reporting that your accounts have fallen into arrears.

You can access a free copy of your credit report, monthly, from Lucid Clear Credit. 

2. Claim on your credit life policy

Almost every credit agreement includes credit life insurance as a mandatory requirement. The purpose of credit life, is to protect the creditor/lender in the event that you (the borrower) succumb to any of the following circumstances (i.e. risk events) viz. death, disability, dread disease, retrenchment etc. The risk events may differ depending on the particular insurance policy. If you experience any of the defined risk events, the policy has a benefit e.g. paying up the full outstanding balance that you owe on the credit agreement or part thereof.

The direct impact of the lock-down has resulted in businesses closing down for 21 days. The indirect consequence will see thousands of people lose their jobs. If you are retrenched, call your creditor/lender and ask for a copy of your credit life insurance. See if the policy covers retrenchment and what the benefit is. In most cases, the policy benefit should repay or cover your monthly instalment for anything from 3 to 12 months. This means that over the period, you are not liable for monthly repayments.

How this affects your credit profile and score

In this instance, if you have claimed for the retrenchment benefit and your claim has been approved, the credit provider/lender should be reporting that your monthly repayments are up to date, notwithstanding you not making any repayments. This will then not negatively impact your credit profile and credit score.

It is therefore imperative for you to check your credit reports regularly over this period, to ensure that creditors/lenders are not reporting that your accounts have fallen into arrears.

You can access a free copy of your credit report, monthly, from Lucid Clear Credit. 

3. Credit Providers/Lenders/Banks are experiencing service disruption

Most creditors are experiencing major disruptions to their businesses. If they are operational, its on skeleton staff and mostly staff working from home. There is a high probability that not all systems and processes are fully operational. This may have a direct impact on their monthly reporting to the credit bureaus.

How this affects your credit profile and score

If you are honouring your monthly repayment obligations, you want this correctly reflected on your credit profile. This will ensure you maintain a good credit rating and credit score.

It is therefore imperative for you to check your credit reports regularly over this period, to ensure that credit providers are reporting that your accounts are in order.

You can access a free copy of your credit report, monthly, from Lucid Clear Criedt.