Penalised if debt free?

PilgrimToHyperion

PilgrimToHyperion

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I'm thinking of paying off my car tomorrow which will make me debt free. I'm worried though that when I apply for a home loan I'll somehow be penalised because I don't have debt. Is this scenario an urban legend or is there any truth to it? My credit record is squeaky clean if that matters.
 
Beylie said:
I'm thinking of paying off my car tomorrow which will make me debt free. I'm worried though that when I apply for a home loan I'll somehow be penalised because I don't have debt. Is this scenario an urban legend or is there any truth to it? My credit record is squeaky clean if that matters.
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It is bad if you dont have a credit profile at all, but you should have a nice credit record already due to items being paid off etc. To keep your record active maybe just use your credit card for daily expensed ... BUT clear it at the end of the month.
 
I have a credit card, but only to purchase stuff online. It never owe anything on it (positive balance is always maintained), but transact on it often. Would that count as being a good payer?
 
Beylie said:
I have a credit card, but only to purchase stuff online. It never owe anything on it (positive balance is always maintained), but transact on it often.
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Why do you keep money in the account instead of using some of your credit limit and paying off the full amount owing at the end of each month?
 
Beylie said:
I have a credit card, but only to purchase stuff online. It never owe anything on it (positive balance is always maintained), but transact on it often. Would that count as being a good payer?
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Just having a credit card, positive balance or not will keep your credit score good.

That being said, you have a built up credit record so even if you don't have debt for 20 years your record is still there as Ockie said. It's an urban legend. Only a problem if you have no previous credit before then it's a slight headache.
 
Beylie said:
I'm thinking of paying off my car tomorrow which will make me debt free. I'm worried though that when I apply for a home loan I'll somehow be penalised because I don't have debt. Is this scenario an urban legend or is there any truth to it? My credit record is squeaky clean if that matters.
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Well, if you wait for 24 months then you might have a problem, because your credit profile will then not reflect your payment history behaviour to any provider checking it, because the history shown to them goes back 24 months. But your score will probably still show at whatever it was

By the way, do you know what is listed on your credit profile?

supersunbird said:
Rather look at the following:

Can get your free (or paid-for reports with scoring) from the below websites:

Transunion (have to pay for scoring, free report doesn't have scoring):
https://mytransunion.co.za/

Experian (free report has scoring):
https://www.creditexpert.co.za/

XDS (free report has scoring):
http://www.credit4life.co.za/

Compuscan (have to pay for scoring, free report doesn't have scoring):
https://www.mycreditcheck.co.za/

For a paid credit report that checks XDS, Transunion and Experian at R79 you can go to any Checkers or Shoprite MoneyMarket counter or you can do it online:
http://www.kudough.co.za/shoprite_partner.aspx

For a paid credit report that uses all 4 the credit bureaus mentioned you can use the below link to buy it online for R99:
https://www.credithealth.co.za/complete-credit-report.htm
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Get a virgin money credit card, it's free. Then pay for stuff using the card and EFT the amount in straight after.
Also if you have a cellphone contract that goes on your credit record.
 
it does seem to be problematic not to have debt, strange as it is.
past 3 times i wanted to buy a brand new car, applying for finance, always got the 'evil eye' coz i dont have any accounts (apart from credit cards and cellular account)
i use the credit cards to pay for everything from food to petrol to groceries to clothes to what have you, and pay only the credit cards

you'd think living as debt free as can be would be encouraged, but doesnt seem like it in ZA
(not that big credit card debt is at all being debt free!)

so nowadays wife started having some clothing accounts... much as i dislike it, for next time i need to buy a car, which is generally only time i want financing

if the main objective of a good credit rating is to pacify the credit supplier that you will pay your accounts, then surely not having much debt in these days' economic climate should really count in your favour :)
 
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A credit record is, in reality, a credit repayment record, i.e. have you repaid all of your debts without there being any hassles.

If so, you are cool ...
 
I was previously refused a monthly cell phone contract.

My record currently shows my Telkom bill and only 1 of 3 home loans... not enough I think.

Vendors have approval systems which may automatically reject your application - you won't find out why.

A creditor may also provide Transunion with wrong data - Transunion will tell you to deal with the creditor to get it corrected and vice versa - not worth the effort.

I would actually prefer that my information be withheld from credit rating companies because I decided to live without a credit record. Unfortunately that is also not an option.
 
Beylie said:
I'm thinking of paying off my car tomorrow which will make me debt free. I'm worried though that when I apply for a home loan I'll somehow be penalised because I don't have debt. Is this scenario an urban legend or is there any truth to it? My credit record is squeaky clean if that matters.
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Hypothetically, what happens if you "pay off" your car but leave a balance of R1 in there and continue to "service it" indefinitely?

However, if in fact that you don't need to be in debt for the banks to consider you then just pay it off completely. the best would probably to speak to a bank.
 
Paid off my car last August, bought a place in November (First time home owner)

No issues.

As mentioned is about your repayment history
 
Think I'm going to pay the car off and save on the interest. I'll definitely be moving house soon, s it won't be a problem. Thanks for all the advice everyone, appreciate it much.
 
rrh said:
A credit record is, in reality, a credit repayment record, i.e. have you repaid all of your debts without there being any hassles.

If so, you are cool ...
Click to expand...

Yip to see how much of a Lanister you are.. ;) and of course what your disposable income is.
 
noxibox said:
Why do you keep money in the account instead of using some of your credit limit and paying off the full amount owing at the end of each month?
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Why not?

I like having as little CC debt as I can manage.
 
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