Debt Counselling (or Debt Review) is a long journey. You work hard in the process. So, it is only natural to wonder what life will be like, or what will happen, once it’s all over.
This question can also be a barrier to entry for some - because they are unsure of what the outcomes and the “life after debt review” will look like and be like.
The short answer is that life will be financially better, and you will be in a stronger position to improve your credit score and financial future. Below, we will explain it in full.
Understanding the debt review process
Before understanding what consumers are allowed to do once the debt counselling process is over, it is important to understand what happens during the process and why they are unable to take on additional credit while under debt counselling.
Starting debt review: Credit Bureaus are notified
When a client signs up for debt counselling, DebtBusters’ expert debt counsellors will ensure that all credit bureaus and credit providers are notified that the client is now under debt review. The credit bureaus will then proceed by flagging the client's profile on their system as 'under debt review'.
Once the debt review starts: no more credit
A very important part of the debt counselling process is that, while under debt review a consumer may not take out additional credit. They are legally prevented from doing so.
This ensures that the consumer does not get themselves further into debt, while completing the process. The debt counselling process is implemented to rehabilitate the client’s financial situation and taking on additional credit will be detrimental to gaining their financial well-being.
When does the debt review process end?
Once the client has paid off their debt, DebtBusters will send a clearance certificate to their creditors, as well as notify the National Credit Regulator (NCR) and the credit bureau via the NCR Debt Help system.
Getting your Clearance Certificate
Years of commitment and hard work will all lead up to getting a Clearance Certificate. The certificate marks the end of the Debt Counselling journey. A consumer is eligible to receive it once all restructured debt is paid up and all bonds or long-term agreement payments are up to date. Debt Counselling fees will also have to be paid before a client receives the certificate.
So, what is to be expected?
- The certificate will be a letter issued by the Debt Counsellor stating that all the clients debt is settled as per their restructure plan.
- Once creditors and the credit bureaus receive the certificate from the Debt Counsellor, they will remove the debt review flag from the client's name.
- The default listings and judgements will be removed from the client's name.
- Only your payment history will remain.
Can I get credit after debt review?
Since credit bureaus will remove the 'under debt review' flag from the client’s profile, one will be able to take out credit after the clearance certificate is issued.However there may be limits to the amount of credit that will be loaned initallty, until the credit score has been rebuilt.
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How does debt review affect credit scores?
Many think that the Debt Counselling process has an overall negative effect on credit scores. But in truth, the opposite is true.
DebtBusters did an analysis of consumers who applied for Debt Counselling and found that on average, over-indebted consumers who successfully complete debt counselling have significantly higher credit scores than those who consider it but do not proceed.
At the beginning of the journey, a consumer's already low score will dip - but that is to be expected because creditors receive less at the beginning of the process (as agreed upon). But as time goes on, through the process, the client’s score will steadily improve.
How to rebuild a credit score after debt review
There are a few ways to work on your credit score.
Here are a few tips:
- Never make late payments or fail to pay your loans
- Don’t max out your credit cards
- Close any credit or store cards that you don’t make use of.
- Regularly check your score and track your habits.
Taking a loan after being under debt review
It is essential to make sure that once you have completed debt counselling and managed to sort out your financial situation that you do not rush into taking on more debt.
Some people find the process of coming out of debt counselling slightly daunting as they are nervous of getting back into debt, whereas other people rush straight back into the credit process. It’s best to take it slow.
Buying a house or car after being under debt review
Since you will no longer have a flag on your name, you will be able to take out car financing or a home loan. However, as mentioned above, you should take it slow and make repsonsible financial choices.
Staying debt free after debt review
Staying debt free, or at least remaining in a space where you’re not over-indebted, can be tricky - especially with the rising cost of living. Here are some tips to help you avoid incurring unnecessary debt.
Set a budget
You must stick to a monthly budget and constantly review it, as well as focus on saving and investing to grow your money.
Create an emergency fund
Set some money aside for emergencies - like hospital bills or car maintenance. These things come out of nowhere and it is good to be prepared ahead of time, ensuring that you don’t have to take loans out to get by in these situations.
For more information on Debt Counselling and DebtBusters contact a debt counsellor on 086 999 0606.
If you are struggling to pay your debt, contact us for assistance!
