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“Debt review” and “blacklisting” are two VERY different things.
Yet, they often come up in the same conversations. Which can be confusing.
Knowing the difference between the two is a game-changer.
Let’s take a look.
Difference between debt review and blacklisted
Debt review is a legal process that helps individuals manage and repay their debts. While being ‘blacklisted’ is a consequence of a bad credit history. Both debt review and being blacklisted affect credit access. But in different ways and for different reasons. Debt review temporarily restricts access to new credit to help applicants repay their existing debt. Whereas blacklisting indefinitely restricts access to new credit till the individual improves their credit history.
Key differences:
- Debt review: A structured process with positive benefits that help people to repay existing debts. Typically lasting 3-5 years.
- Being blacklisted: A negative credit status that reflects credit issues like defaults or legal action. Typically lasting between 2-10 years, depending on the severity of the negative listings on the person’s credit report.
Those are the basics. But it goes deeper.
Let’s start with a side-by-side comparison. Then, we’ll go into specifics.
Debt review vs blacklisting:
Aspect | Debt Review | ‘Blacklisted’ |
Definition | A debt-relief process regulated by the National Credit Act (NCA). | A term for having a credit profile with negative listings. |
Purpose | Helps consumers to repay debt. | Warns lenders of risk. |
Impact on Credit Access | Temporarily limits access to new credit while under debt review. | Severely restricts or blocks access to most credit options. |
Managed By | A registered debt counsellor. | No active management; simply a result of credit behaviour. |
Duration of Credit Restriction | Typically lasts 3 to 5 years. | Lasts between 5 to 10 years for some negative listings, but can last indefinitely without improvements. |
Struggling to pay your debt bills? Check to see if you qualify to lower your debt instalment and free up money for other expenses.
Blacklisted
What is blacklisted?
In finance, blacklisted is an informal term that describes a person who has a bad credit profile with negative listings, such as defaults, judgments, or missed payments. When someone is ‘blacklisted’, it means that lenders are unlikely to approve new credit, because the person’s credit history indicates that they may not repay the debt.
Essentially, if someone has a really bad credit score, it means they’re effectively ‘blacklisted’.
Bear in mind, South Africa does not officially use the term “blacklisted” anymore. There isn’t a blacklist. It simply refers to a poor credit record that affects access to loans or financial services.
What happens when you are blacklisted?
When someone is blacklisted, lenders may reject applications for loans, credit cards, cellphone contracts, car financing, or other financial services. Plus, homeowners and property agents may be reluctant to approve rental agreements. Bad credit behaviour like missed payments or legal action builds up and creates negative listings, which weaken the person’s credit profile till they’re effectively ‘blacklisted’.
These listings, such as defaults or judgments, last from 2-10 years and can have an indefinite effect on the person’s credit profile unless they change their credit behaviour and improve their credit score.
Here’s an example.
Example:
Sam defaults on a personal loan and misses credit card payments. Now, the default listings hurt her credit profile. Eventually, creditors take legal action, which leads to a court judgment. Now, the judgment listing hurts her credit profile even more. As a result, her bad credit score means she is effectively ‘blacklisted’, and her applications for car finance get rejected.
- Reason for restriction: Court judgment and missed payment listings on Sam’s credit report.
- How to regain credit access: By settling overdue accounts and maintaining positive credit behaviour till the negative listings clear.
- Typical timeline: Defaults, judgments, and other negative listings can remain on profiles for 2-10 years, depending on the type of listing, but accounts can be updated sooner once resolved.
How do I know if I’m blacklisted?
To check if you’re ‘blacklisted’, get a copy of your credit report from a credit bureau like TransUnion, Experian, or XDS. Review your credit score and check your credit report for negative listings such as defaults, late payments, or judgments. A low credit score or lots of listings may indicate that you’re ‘blacklisted’.
Other tools like My Credit Check and ClearScore make it easy to check your credit score.
📖 Related content: How to check if you’re blacklisted
Debt review
What is debt review?
Debt review is a legal process that helps South Africans who are struggling to pay their debts. The process makes monthly payments more affordable, temporarily restricts access to new credit, and offers other benefits like legal protection. The process is governed under the National Credit Act (NCA) and regulated by the National Credit Regulator (NCR) to give South Africans a safe and reliable way to get out of debt.
When a person applies for debt review, a debt counsellor works with them and their creditors to create a reduced repayment plan. While under debt review, the person can repay their debt at a more affordable rate, but they may not take out new loans or credit.
They get a debt review status indicator on their credit report, which tells lenders not to approve new credit applications till the person settles their existing debt and gets a debt review clearance certificate at the end of the process.
📖 Related content:
Am I under debt review?
To confirm if you’re under debt review, check your credit profile for a “debt review” status/flag. Get a copy of your credit report from a credit bureau like TransUnion, Experian, or XDS to review your credit profile. The only way to remove the debt review status after debt review is by getting a debt counsellor to issue a clearance certificate.
As you can see, there’s a big difference between debt review and being blacklisted.
The idea that someone is blacklisted when they apply for debt review is a misconception.
And it’s not the only one…
Common misconceptions about debt review
Debt review and blacklisting are the same:
They’re not the same. Debt review is a legal process to help manage debt, while blacklisting happens when there are unresolved credit issues like defaults or judgments.
People under debt review are blacklisted:
No, being under debt review does not mean being blacklisted. While it does limit access to new credit (temporarily), it does not create negative listings unless payments are missed during the process.
Debt review has a permanent negative impact:
Debt review is temporary, and it has a positive impact when applicants follow the process. After the process and getting a clearance certificate, it becomes possible to build a good credit score.
Only people with severe debt qualify for debt review:
Not true. Debt review is for anyone who is struggling to keep up with monthly debt payments and is considered over-indebted.
People lose their belongings to repossession under debt review:
This isn’t correct. In fact, debt review is designed to protect assets like homes and cars from repossession as long as the repayment plan is followed.
Earlier, we mentioned that being blacklisted affects loans, credit, rental applications and more…
Check this out.
The impact of debt review vs ‘blacklist’
Here’s how debt review and ‘blacklisting’ affect renting, employment, loans, car finance, and buying a home.
Here’s the revised table with short, direct comparisons:
Aspect | Debt Review | Blacklisted |
Renting property | Not as restrictive as being blacklisted. But, landlords may want to see affordability. | Rental applications are often denied. |
Employment | Rarely affects employment. | Can affect employment for some roles. |
Loans | Temporarily restricted under debt review, but available after completion. | Loans are usually denied. |
Buying a car | Temporarily restricted under debt review, but available after completion. | Financing is usually denied. |
Buying a home | Temporarily restricted under debt review, but available after completion. | Home loans are usually denied. |
How to avoid being blacklisted
To avoid being blacklisted, pay bills on time, review credit reports regularly to catch issues early, and negotiate with creditors to adjust payment terms if needed. Avoid taking on more credit than can be managed. For people with lots of debt, applying for debt review provides a reliable way to avoid being blacklisted. With an affordable repayment plan and legal protection.
In summary
Now, do you know the difference between debt review and being blacklisted?
Think of it this way…bad credit and being blacklisted is the disease, and debt review can be an antidote.
Here are the key differences once more:
- Debt review: A structured process with positive benefits that help people to repay existing debts. Typically lasting 3-5 years.
- Being blacklisted: A negative credit status that reflects credit issues like defaults or legal action. Typically lasting between 2-10 years, depending on the severity of the negative listings on the person’s credit report.
If you’re concerned about being blacklisted or if you are ‘blacklisted’. Then, debt review could help turn things around.
Want to learn more? Keep reading on Everycent.
Struggling to pay your debt bills? Check to see if you qualify to lower your debt instalment and free up money for other expenses.