Can you be blacklisted while under debt review?
When you are under debt review you, you won't be blacklisted. In fact, blacklisted is a terminology that doesn’t really exist. When you go under debt review, there is a flag that gets placed on your credit report. This is just to let creditors know that you temporarily can't access further credit. This has often been cited as one of the disadvantages of the debt review process. But, it's important to note two things:
- Once you've successfully completed the debt review process, this flag gets removed, so you will be able to access credit again.
- This temporary lack of access to credit is the only true way of really getting out debt. You can't create more debt if you're serious about getting out of it.
Blacklisted?
Many people tend to use the term “blacklisted”, but this doesn’t exist. Your credit record is a record of your credit history and payments. If you miss payments and fall into arrears, your credit report will be negatively impacted and the score will lower as a result. This is what 'blacklisting' can refer to—negative information on your credit report.
If you make regular repayments to your debt, then your credit report is positively impacted. This will improve your score and it will increase. You see, you can’t really be blacklisted; your score can just be low or high. Your creditors will look at your score to determine whether you are reliable at paying your debts. If your credit score is low, this means you are a high-risk borrower.
Understanding Debt review
If you are struggling to pay off your debts and want to improve your credit score, debt review may be an option for you. When you enter debt review, your debt counselor will reach out to your creditors. They will negotiate lower monthly payments and interest rates. This means you will pay less each month.
Your debt counselor will create a new repayment plan for you. You will only need to make one smaller payment each month. You will have enough money to pay off your debts and for living expenses as your debt counsellor will have created a new budget for you as part of the process.
Your creditors will no longer be able to initiate any legal action against you and you will now be on your way to financial freedom. Once the process has been completed, your credit record is repaired and any reference to negative info is removed
If you are in debt and struggling to make your repayments, contact us today for help!
Can You Be Blacklisted During Debt Review?
No, you cannot be "blacklisted" while under debt review. The debt review status on your credit report is not a negative listing but a protective flag. It signifies that you're actively working towards settling your debts responsibly. Creditors view this positively, as it demonstrates your commitment to financial rehabilitation.
However, if you had negative listings (such as defaults or judgments) before entering debt review, these will remain on your credit report for a specified period, even while under debt review. It's essential to address these issues with your debt counsellor, who can guide you on the steps to rectify them
Completing Debt Review
Upon successfully completing your debt review process:
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Clearance Certificate: Your debt counsellor will issue a clearance certificate, confirming that all debts under review have been settled.
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Credit Report Update: The debt review flag will be removed from your credit report, allowing you to access credit again.
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Credit Score Improvement: With responsible financial behaviour post-debt review, your credit score can improve over time.
Frequently Asked Questions (FAQs)
Q1: What does it mean to be "blacklisted"?
A: Being "blacklisted" refers to having negative information on your credit report, such as defaults, judgments, or late payments. It's not an official list but a reflection of your credit history.
Q2: Will entering debt review remove existing negative listings?
A: No, existing negative listings remain on your credit report for a specified period. However, debt review prevents new negative listings from being added, provided you adhere to the repayment plan.
Q3: Can I apply for new credit while under debt review?
A: No, you cannot access new credit while under debt review. This restriction helps you focus on repaying existing debts without accumulating more.
Q4: How long do negative listings stay on my credit report?
A: The duration varies:
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Defaults: 2 years
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Judgments: 5 years
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Sequestrations: 5 years or until rehabilitated
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Debt Review Status: Until a clearance certificate is issued
Q5: What happens if I miss a payment during debt review?
A: Missing payments can lead to the termination of your debt review process, and creditors may resume legal action. It's crucial to maintain consistent payments and communicate with your debt counsellor if issues arise.
Q6: How can I check my credit report?
A: You are entitled to one free credit report annually from each of the major credit bureaus
Regularly reviewing your credit report helps you stay informed about your financial status and address any discrepancies.
Q7: Is debt review the same as debt consolidation?
A: No. Debt review involves a legal process with a debt counsellor negotiating reduced payments with creditors. Debt consolidation typically involves taking out a new loan to pay off existing debts, which may not be suitable for over-indebted individuals.
Q8: Can I exit debt review before completing the process?
A: Exiting debt review before completion is challenging and generally not advisable. It's best to see the process through to ensure all debts are settled and to receive a clearance certificate.
If you're struggling with debt and considering debt review, it's essential to consult with a registered debt counsellor who can assess your situation and guide you through the process. Taking proactive steps today can lead to a more secure financial future.
