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11 Nov 2011

Banking Charges Lead To Credit Bureau Blacklisting

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Tristan Powys (Credit Counsellor) @ Lucid Living

After several days of waiting, Josephine suddenly got a call from the credit officer of the bank with which she had applied for a loan. He advised her that the loan had been declined, and would not be approved unless she cleared her name with the credit bureau over an adverse listing (blacklisting).
She had never previously applied for a loan from any bank nor defaulted on repayments to earn the blacklisting.

But when she received her credit report from Lucid Living, Josephine realised she had been penalised for failure to pay monthly ledger fees for a bank account she had since abandoned.

The account was heavily overdrawn. The bank had been debiting it with the ledger fees, leading to the blacklisting.

Josephine’s ordeal is not unique. Many customers like Josephine have found themselves blacklisted without knowing why.

Most customers mistakenly believe they do not need to obtain a copy of their credit report from the credit bureau especially when they do not owe or have never defaulted on a bank loan.

But there are many pitfalls that can get you blacklisted, without you necessarily being a bad borrower. Any amount of negative information on your credit report can prove disastrous for future loan applications. Regardless of the number of positive credit listings you have, one poorly managed account can drive your credit score down.

Below are some of the things to watch out for if you want to keep your credit report clean.

Abandoning a bank account that attracts monthly ledger fees: If you can no longer maintain a bank account, close it by following the procedures spelled out by the bank.

Although this depends on the type of bank account you run, some attract monthly ledger fees which will continue accruing even after you have abandoned it. Whether the account is active or not, the monthly ledger fees continue to pile.

ATM card fees: Sometimes the bank may issue an account holder with an ATM card beforehand with a promise to recover the application fees once the account is credited with some cash.

Any time before the bank recovers the ATM processing fees from the customer, the account will show negative balance. Failure to make any deposit for up to three months or more depending on the bank can earn you a penalty and subsequent blacklisting with the credit bureau.

Failed direct debt: This is common amongst insurance policyholders who sometimes in their effort to cancel or terminate their insurance policy resort to rendering their accounts dormant without any cash balance for their insurers to make deductions towards premium payments.

Whenever a customer signs a direct debit allowing the insurance company to make deductions from his bank account, the bank will charge some fees to effect the debit.  The client’s failure to maintain a cash balance in this account equivalent or exceeding the direct debit deductions will attract a penalty fee. This can be as much as R150 per unsuccessful transaction.

The accumulation of the penalty fees and defaulting on the insurance premiums will automatically give you a bad name with the bank and may give rise to a blacklisting.

Remember that currently, banks are compelled to share negative information on non-performing loans and therefore checking and updating your credit report as a timely payer is important.

We know that credit reports have errors, that if not checked may give a potential lender an inaccurate picture of you.

It is imperative to view your credit report and correct any inaccuracies.

A failure to do this, will result in any new loan applications being declined or if approved, you will be paying a higher interest rate.

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