If most of us think back to our childhood Christmases, among the haze of decorations, overflowing stockings, terrible fruitcake, overplayed Christmas carols and mounds of wrapping paper - one iconic image always springs to mind - Santa and his notorious naughty list.
Parents around the globe use the concept of a 'Big Brother' type Santa Claus (and a naughty list so long that it would surely take 100 Amazon rainforests to create) to literally terrify bad behaviour out of their children's repertoire. The pure notion of waking on Christmas morning to a stocking filled with coal and a note from Santa, saying “try again next year, Johnny”, are so unimaginably hideous that for weeks before Boney M and fake Santas filled stores, children ensure their urge to spit, cry, scream and stomp are suppressed.
Years later, you learn that, among other things, your parents are lying beasts who used the story of Santa, and more importantly his naughty list, to keep your temper tantrums at bay. While this realisation may be dauntingly horrific when you are 10 years old, it does serve as excellent preparation for the many other naive beliefs that reality will shatter as you grow up. One such false belief centres on the existence of another list, which too brings shudders at its mere mention - the blacklist.
In a recent study, conducted by Compuscan, 74.1% of individuals said they believe credit bureaus hold a blacklist. The term blacklist implies that credit bureaus, like Santa, hold a list comprising only negative information. In other words, a list of each naughty individual who has skipped or been late on a payment, or who has absconded. In fact, in South Africa, credit bureaus keep both positive and negative data, which is intended not to prevent consumers from receiving credit, but to help them to access it when needed. One can see the breadth of credit bureau data if one looks at the June 2011 Credit Bureau Monitor (issued by the National Credit Regulator), which shows that out of the 18.84 million credit-active customers, 53.3% of customers are in good standing and 46.7% have impaired records. An impaired record refers to a consumer who has missed three or more payments on a credit repayment, has an adverse listing, a judgment or an administration order against his or her name.
The way in which positive and negative data work together on your credit record is very similar to the way the size of your present heap was calculated as a child. Smacking your sister with a cricket bat may not have landed you on Santa's naughty list - but it may have made your parents reconsider buying you other toys that could have been used as weapons. However, sharing your sweets with your little sister, helping her with her homework, and dehumanising yourself by playing with dolls may actually have levelled out their perception of you (even after said bat-smacking incident) so that you were not penalised with a smaller present heap come Christmas. Likewise, credit providers look at both the positive and negative data on your credit report when they determine whether to grant you credit. Thus to refer to this sharing of information between credit bureaus and credit providers as a “blacklist” is a severe misunderstanding of the system, as most of the data held by credit bureaus is, in fact, positive (roughly 75%) and will assist consumers to receive credit.
There is, therefore, no naughty list and no blacklist! Nor is there a secret database held at credit bureaus that will immediately prevent you getting access to credit if your name appears on it. In fact, if your name appears on a credit bureau's database, it does not mean that you have a bad credit profile, nor does it mean that you will be declined credit. It simply means that you have an account with a particular credit or service provider. The truth of the matter is that if credit bureaus do not have your name on their database, you will most likely not be granted credit as there is no record of how good or bad your repayment behaviour is. It is this historical information held by credit bureaus that shows how a person conducted credit transactions in the past, which enables consumers to receive credit.
By holding both positive and negative information, credit bureaus present a holistic picture of an individual's payment behaviour. The credit system in South Africa is in fact so advanced that the World Bank's 2011 Ease of Doing Business report ranked South Africa second for its ease of access to credit.
So now that you know that neither Santa nor credit bureaus keep a blacklist - does it mean you can run amok and have no regard for your behaviour or credit repayments? Unfortunately not. Just like your parents were sure to examine your behaviour over the previous year before buying you that ridiculously expensive remote-controlled car - so too will credit providers look at your repayment behaviour before granting you credit. If this was your third ridiculously expensive remote-controlled car in three years and all three predecessors were driven into walls, swimming pools or your father's ankles - then you may have had to get used to building your own go-cart to terrorise people with. In the same way - if you decide you'd rather ignore your creditors than pay your accounts - chances are you won't be getting credit in the near future.
The bottom line is that your ability to receive credit, like your ability to receive Christmas gifts, depends on you and your behaviour - list or no list. So be good for goodness sake!
If you want to see whether you've been naughty or nice this year - contact Compuscan for your free credit report on 0861 51 41 31 or info@compuscan.co.za or visit www.compuscan.co.za.
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