Credit invisible South Africans a huge problem

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THANDI XABA

Almost one fifth, which is over 19.5% of adults in South Africa are credit invisible, which places them at risk of never qualifying for traditional lines of credit.

This means more than 5 million adults in South Africa don’t have a credit history recorded at any of country’s major credit bureaus, which makes them effectively credit invisible.

Manager of Consumer Education at Transunion Salem Dyafta says lenders need to know consumer’s pay and credit history in order to trust them with any form of credit provided.

According to Statistics SA’s 2014 mid-year report, there are over 27.3 million people over the age of 20 living in the country, with the latest Credit Bureau Monitor published by the National Credit Regulator, that the number of credit-active consumers in South Africa is at 22,12 million.

“That means more than 5-million adults in South Africa don’t have a credit history recorded at any of South Africa’s major credit bureaus. These people are effectively credit invisible,” said Tersia van Rooyen, director: e-Commerce at TransUnion, South Africa’s largest credit bureau.

“Without any kind of credit history, consumers are largely precluded from accessing credit and taking advantage of certain opportunities.”

For example, credit invisible individuals may find it more difficult to rent accommodation, purchase a home, buy a car, obtain insurance, get a credit card or a store card, or even obtain a student loan.

International research such as that conducted recently by the Consumer Financial Protection Bureau (CFPB) in the United States found that it was consumers living in low income areas and were already economically vulnerable and more likely to be in a precarious financial position, who were most likely to be credit invisible.

The CFPB’s research also found that around 10% of US citizens were credit invisible – a situation that is raising alarm bells and has prompted urgent investigations by credit agencies to find ways to bring invisible and unscored consumers into the credit fold.