This flag or listing on your credit report also helps prevent reckless lending by credit providers and can protect you from digging yourself deeper into debt which you cannot afford to repay.
How?
Many people fall into a pattern of trying to get more debt rather than looking for real solutions to challenges they face. Sadly, if you already have too much debt, digging yourself deeper into debt is not a real solution. It will simply make matters worse.
Should a credit provider want to offer you more credit they first have to draw a credit report and see what other debts you already have. They then have to check if you can really afford to make regular debt repayments each month on new credit.
If you are already in debt review and have special arrangements in place with all your existing credit providers, any new credit will mess with your budget and mess with your plans to pay off your existing debts.
‘Offering credit to someone who cannot really afford to repay that credit can cost a credit provider up to R1 million in fines’
So, when a credit provider sees that temporary listing of your ongoing debt review they won’t even break out the calculator and check if you can afford to pay even more debt. They already know you are focused on getting out of debt (not deeper into debt).
So, it protects them from breaking the law and offering credit to someone who cannot afford to pay the money back each month. Offering credit to someone who cannot really afford to repay that credit can cost a credit provider up to R1 million in fines.
You can understand why credit providers want to avoid such massive fines whether you are in debt review or not.