Knowing Credit: Credit Applications [Part 1/6] Consumer and Provider Rights

Welcome! In our previous series of lessons, we discussed the ...

Knowing Credit: Credit Applications

Welcome! In our previous series of lessons, we discussed the basics of credit.

These lessons covered:

– an introduction to credit and the credit life cycle,

– the advantages and disadvantages of having credit,

– credit applications and the documentation required by FICA[1] to apply for credit,

– budgeting for whether you are able to afford your credit repayments,

– getting information from different providers about various rates,

– bad versus good credit, and

– credit life insurance.


Definition of the week: RIGHTS

Rights are the privileges, principles and basic rules that a person (or a company) is entitled to.

Rights give a person or company certain types of freedom or entitlement, or protect them from harm or damages. Rights are prescribed, governed and enforced by law.


Knowing Credit: Credit Applications

In this next series of lessons, we are going to discuss credit applications in greater detail. There are a number of documents you need to give the provider when applying for credit. When you apply for credit, know that you have certain rights and responsibilities. On the other hand, the credit provider also has rights and responsibilities.

Why do you have responsibilities? In order to take out credit, you need to be responsible. You should borrow responsibly by only taking out what you can afford to pay back, you should pay your account on a regular basis, and be prepared for any possibility that may negatively affect your credit score. Applying for credit is a very serious decision to make!

In the same way, a credit provider is responsible for preventing you from becoming over-indebted. We sometimes become frustrated when a credit provider refuses to extend our existing credit, or does not initially lend the full amount we requested. However, we must also remember that the credit provider has a duty to protect your rights and your financial well-being, whether you are trying to extend existing credit or whether you are applying for credit for the first time.

Let’s look at some of the rights and responsibilities for both the consumer and the credit provider, as stipulated by the National Credit Act.

Your rights when you apply for credit

You have the right to:

– apply for credit;

– be protected against discrimination in terms of being granted credit;

– be given reasons why your credit application was declined;

– receive all the relevant documentation (e.g. a pre-agreement statement and quotation); and

– be given any information about your credit application in plain language that is easy to understand.

The credit provider’s rights and duties

A credit provider has the right to:

– Request your consent for accessing your credit history from a credit bureau; and

decline your credit application, AND provide an explanation for declining it, should you request it.

Helpful Hint: A credit provider makes a decision on whether or not to grant you credit, based on the information you provide. Make sure that all the information you provide is correct, or you may have your application declined, or become over-indebted! To check your credit history and current information, visit www.mycreditcheck.co.za for a full report[2].

For more information about rights and responsibilities when applying for credit, visit the National Credit Regulator’s website at www.ncr.org.za.

Come back next week to learn more about the criteria that credit providers use to determine your affordability when taking out credit!


Sources:

[1] The Financial Intelligence Centre Act, 2001

[2] Consumers are entitled to one free credit report a year, however on www.mycreditcheck.co.za, you can get monthly reports and alerts for a small fee.