2009/01/28

Did you know that not paying your rent on time can lead to a blacklisting?

According to the latest figures from TPN, a registered credit bureau, 46% of tenants are facing financial challenges meeting the rental obligations.

For many South Africans the consequences of being blacklisted are not taken seriously because the implications are not fully understood. Consumers who are juggling many debts may opt not to pay certain accounts timeously.

There is a misconception in the market that it is more serious not to pay a bank loan or car finance as these financial institutions have large legal departments. However, the requirements for listing adverse information on the credit bureau are the same for all credit providers who do not always require the services of an attorney.

Blacklisting refers to either a judgment - which remains on your credit profile for a period of five years or an adverse listing by your credit provider or landlord with a retention period of two years. So why should you care about your name on a list?

The financial implications are serious and often taken for granted as many defaulters justify that they will not be looking at applying for a home loan or vehicle finance within the next couple of years anyway.

However, what if you or a member of your family is in serious trouble and you need an emergency bank loan? What if you would like to open up your own company or apply for a store card, credit card or a new job in the financial sector? What if you are looking for a new place to rent?

All of these and many more aspects of your life will be negatively affected by your blacklisting.

Michelle Dickens, managing director of TPN, says: "Many tenants don't realise that not paying your rent can lead to a blacklisting. When looking for a place to rent make sure you only rent what you can afford. You can work this out by calculating your disposable income after you have paid off all of your expenses. Many tenants do not fully understand the terms and conditions of the lease agreement or enter co-lease agreements and are taken for a ride."

Siphokazi Ngxatu was recently blacklisted because of a co-lease agreement gone bad. "I had co-signed a lease with a childhood friend. There was trust in our relationship and I thought she was a responsible adult like myself. However, I did not take care to read the fine print and because of the three months rent she lapsed without my knowledge, I was blacklisted along with her. This whole experience has cost me my credit reputation and friendship."

Chris Sullivan, debt councillor at Life Power, explains some basic steps to avoid being blacklisted:

- Set up and stick to a personal budget
- Do not overcommit yourself financially - know your limitations
- Stop using your credit cards and store cards if you can't meet the
minimum required payments every month
- Spend your available money on your rent or other good debt such as
your car or credit card.
- Don't buy what you can't afford, it may be nice but it may also not
be necessary

"If you do find yourself in a tight squeeze with your rent make sure that you have an honest and open discussion with your landlord about your financial situation. Together draw up another plan and make sure you stick to it or the financial implications you carry into the future could seriously damage your chances of being a homeowner yourself one day," Dickens says.

Property24