Redefining credit beyond debt – Moneyweb

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DUDUZILE RAMELA: Every family has its own unique characteristics that are passed down from generation to generation. A healthier relationship with money is one that needs more deliberate attention, if you will – and a strong credit score is a good start.

Sikhulule Mabece is head of Legal and Compliance at Experian Africa. He joins us to take a look at this. Thank you very much for your time this morning, sir. You argue that despite its importance, ‘credit’ is often misunderstood or viewed only as debt. What’s the difference?

SIKHULULE MABECE: Good morning, Dudu. Thank you so much for having me on today.

Dudu, I want to say that there are slight similarities, but the way that I look at it is that it’s really all around the purpose for which you use this credit facility or this this loan – whatever credit product you’re using.

What I mean by the purpose is that debt is traditionally viewed as a negative thing, a financial obligation and the like, when credit is actually a lot broader. It’s the reason why I decided to write this article during this month, Heritage Month.

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Credit is broader in that it’s more than just debt. Rather, it is a springboard or a bridge that can enable to reach our financial goals.

So understanding the economic hardships in South Africa right now; things are tough out there, and credit is one of those things that can really springboard you or function as a bridge between these hard times and all of these financial goals that we have.

DUDUZILE RAMELA: Managing that debt, right? I’ve never been in quicksand and can only use my imagination, but from what I’ve seen being in debt can be all-consuming. So you feel like you are being sucked in and you are drowning, if you will.

What are some of the practical ways to actively reach for that branch to help you out and manage your credit health?

SIKHULULE MABECE: Thanks, Dudu. I think a starting point is really that you need to be informed. There’s quite a popular saying that you cannot manage what you cannot measure.

So the first thing for me is having a clear view or a full picture of your financial situation –  and that’s where your credit report comes in.

Once you have that credit report, you can start to have things like budgets and making plans to take those steps forward and, in your words, start to move out of that quicksand.

Now, the important thing for me is that when you have that knowledge, when you have that understanding, when you have that budget or that plan, it’s really all about consistency. Those small actions – paying your debts on time and the like – those really, really go a long way to helping you out of that that quicksand you mentioned.

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DUDUZILE RAMELA: Totally. I think if you’ve been in debt you’ll know those calls that you get –  and they tell you at the end of the call, ‘Remember, if you don’t honour your agreement it will impact your credit score’. So picking up the phone, for instance when you get that call, how important is it – and to honour your agreement?

I think maybe we can reiterate that, because you often hear people say, ‘Ah, it’s a spam call. I don’t want to answer it’. Or ‘Oh, it’s this one that I owe – I don’t want to answer it’. What is the danger in not actually facing this head on, and burying your head in the sand, if you will?

SIKHULULE MABECE: If you could see my face right now, I was having a little bit of a giggle, because most of us know how that actually feels – I think it’s the 087 numbers. A lot of us really don’t want to answer them.

But it is really, really critical that you do actually answer those calls, because more than just your credit profile or your credit score being ‘some number that judges you or judges how you make use of your credit or honour your debts’, I want to flip that on its head and say that it’s also an opportunity for you to gain access to opportunities that you wouldn’t normally have.

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So the credit score can help you access debt in times of emergencies and the like. But looking at it from the other way, and keeping with the theme of trying to build wealth, those calls are the only way that you can ensure that you’re taking all of the actions that ensure that your credit profile is something that – rather than being a disadvantage – can actually work to your advantage.

You can actually use that and leverage that to access all of those opportunities – be it seeking a loan for your business, be it accessing finance so that you can go and study at university and start your career – all of those kinds of things.

So we shouldn’t only look at those as negatives and obligations to pay, but actually as a tool that we can use to open opportunities and give us access to resources that we wouldn’t traditionally have, which can actually make a huge impact in all of our financial futures.

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DUDUZILE RAMELA: Sikhulule Mabece is head of Legal and Compliance at Experian Africa. Thank you very much, sir, for your time this morning.

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