How Does Debt Review Affect Credit Score

By Mav OT •  Updated: 02/14/24 •  6 min read

It is very important to understand how to handle debt and your credit score if you want to stay financially stable and disciplined.

Debt review, which is not always known correctly, gives people a structured way to deal with their debt and a way to get back in charge of their finances. 

One way that debt review tries to help people make repayment plans that work with their unique financial situations is by looking at their income, spending, and debts.

Credit scores are also necessary to get access to financial possibilities. It is important to know how credit scores are generated and the different things that can change them so that you can make smart financial decisions. 

In this blog post, we will analyse how debt review affects credit score, the consequences of debt review in South Africa, and the realities that await your credit score after debt review. 

How does debt review affect credit score?

Debt review can have a big effect on a person’s credit score, which can have good and bad effects on their finances. 

On the bright side, reviewing your debt has more pros than cons. 

Debt review is a well-organized way for people who are having money problems to get control of their finances. Participating in a debt review program gives people the chance to work out better terms for paying back their debts with their creditors. They can also combine their debts into one and make a more reasonable plan for paying them back. By sticking to this strict plan, people can show credit bureaus that they are responsible for their debt, which could gradually make them more creditworthy.

Even so, there are some problems with the process of reviewing debt. During the review process, people who are getting debt counselling are usually flagged as such, which lenders may see as a bad sign and could make it harder for them to get more credit. 

Credit scores can also go down if payments are missed or made late during the review time.

In the end, debt review gives people a structured way to deal with their debt, which may help their credit scores by promoting good money habits. There are, however, some short-term limits on credit access, and if they are not carefully handled, there is a chance that credit damage will get worse. In the end, a person’s credit score depends on how hard they work at improving it and how careful they are with their money.

What are the consequences of debt review in South Africa?

In South Africa debt review also has big effects. It makes it harder for them to get more credit during the review time, which could limit their financial options. The fact that someone is being reviewed for debt also shows up in credit files, which can hurt their credit score. In the future, this could make it hard for them to get loans or find homes. Also, reviewing debt can often extend the time it takes to pay back the debt, leading to higher interest rates and longer periods of financial trouble. Debt review can unfortunately come with a social stigma that can hurt a person’s image and sense of self-worth. Also, if you do not follow the debt review plan, your creditors may take legal action, like seizing your assets. Because of this, people should carefully think about the possible outcomes before choosing to go through a debt review, which provides a structured way to handle debt.

What kind of debt affects your credit score?

One thing you must understand is that debt is not the only thing that affects your credit score. The components that make up the credit score are more than the debt you can imagine.

When it comes to debt, payment history is considered to be the main set. Certainly, the other subset has an influence but not directly on the debt. 

Personal loans, car loans, mortgages, student loans are all sorts of debt that can affect your credit score. 

What happens once debt review is over

Debt review is part of the fundamentals of every credit score. It is certainly a must for every individual who has one credit to at least go through a debt review. Although there are negative effects of debt review, the overall review has a positive impact on your credit score. 

Once the debt review is over, creditors take off the “review flag” from your credit profile. The debt counsellor may contact your lenders, creditors and credit bureau who were involved in this credit bureau to give them the final verdict. Once all is set, your clearance certificate will be issued to you. 

How long does it take to build a credit score after a debt review?

Based on past events, building credit after debt review usually takes a very short time. This is because your credit is well analysed and assessed to see the shortfalls. This evaluation is done to improve your credit score

Ideally, a credit score should start looking good after 90 days of the debt review. 

What are the disadvantages of getting into debt review?

Some of the cons of getting into debt review can be psychological and can give you a mental breakdown. At the same time, some may also affect your financial activities. 

Here are some of the disadvantages of getting into debt review. 

You can not do as much with your money while your debt is being reviewed. You might have to stick to a strict budget and get permission before making big financial choices.

Keep Reading

Where Can You Access Your Credit Score For Free

Where Can You Access Your Credit Score For Free

Today, we will walk you through everything to know about finding and accessing your credit score safely and for free. Let’s get started!

The Credit Score Required For a Home Loan

The Credit Score Required For a Home Loan

If you see a shiny new set of house keys in your future, then it is time to pay serious attention to your credit score. 

How to Enhance Your Credit Score After Debt Counseling

How to Enhance Your Credit Score After Debt Counseling

Don’t lose hope! You can still take steps to rehabilitate your credit and get yourself to a better place financially. 

How to Get a Bond With a Bad Credit Score

How to Get a Bond With a Bad Credit Score

It’s a stringent market. Don’t give up just yet! We do have some good advice for you.

Why is my Credit Score Not Increasing?

Why is my Credit Score Not Increasing?

Today, we will be unpacking some of the reasons that may hinder your credit score’s growth and what you can do about it.

What Credit Score is Needed to Buy a House?

What Credit Score is Needed to Buy a House?

What Credit Score is Needed to Buy a House? Here’s what you need to know. 

What Is A Good Credit Score For A Personal Loan

What Is A Good Credit Score For A Personal Loan

However, it is important to always find means to ensure you improve your credit score and find ways to minimise getting bad credit.

What Is A Good Credit Score to Buy A House In South Africa?

What Is A Good Credit Score to Buy A House In South Africa?

As we advocate good credit scores, we will take you through the required credit score to acquire a house. 

How Many Credit Scores to Unlock GCredit

How Many Credit Scores to Unlock GCredit

How to Get Quick Cash When Your Credit Score is Low in South Africa

How to Get Quick Cash When Your Credit Score is Low in South Africa

How to Get Quick Cash When Your Credit Score is Low in South Africa. Today, we will explore some of them with you.

How to Reset Your Credit Score

How to Reset Your Credit Score

How to Remove Late Payments From Credit Score

How to Remove Late Payments From Credit Score

How to Remove Late Payments From Credit Score. However, this isn’t always straightforward due to certain rules and procedures.

How Does Your Credit Card Impact A Credit Score?

How Does Your Credit Card Impact A Credit Score?

How Long Does Credit Score Take To Improve

How Long Does Credit Score Take To Improve

As we continue, you will learn more about bad credit scores, the time it takes for credit scores to improve and many more. 

Which Subscription Will Build Your Credit Score In South Africa?

Which Subscription Will Build Your Credit Score In South Africa?

Subscriptions will not universally count towards building your creditworthiness. Let’s take a look in more depth.