New Credit Rule! Overdrafts Can Now Lower Your Credit Score In South Africa

If you’re one of the many South Africans who occasionally dips into your overdraft, take note: this could now impact your credit score. A new provision under the National Credit Act—effective from 1 March 2025—requires banks to report overdrafts where customers are overdrawn by more than R500 for 30 days or longer.

While some banks have notified their customers, not everyone is aware of the change. According to Chris Coetzee, CEO of FinFix, this adjustment marks a major shift in how creditworthiness is evaluated across the country.

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“While this change brings some positive outcomes, it also introduces challenges that could have far-reaching consequences for consumers as well as the broader credit industry,” says Coetzee.

More Accurate Credit Checks — But At What Cost?

The inclusion of overdraft information in credit reports means credit providers will now have a clearer view of your financial behaviour. This could lead to more accurate affordability assessments and reduce the risk of over-indebtedness.

“In the past, overdrafts were often excluded from these calculations unless you voluntarily disclosed it,” Coetzee explains.

“With overdrafts now included, credit providers can better evaluate a consumer’s true financial position, reducing the risk of over-indebtedness. For example, if someone consistently relies on their overdraft to make ends meet, this will be flagged as a potential indicator of financial strain.”

He adds that this promotes transparency and accountability for both lenders and borrowers:

“This levels the playing field for both consumers and lenders. Credit providers will have a clearer picture of a consumer’s financial habits, which may help prevent reckless lending practices. It also encourages consumers to be more mindful of their spending and borrowing behaviour.”

Because overdrafts were once treated as invisible debt, consumers may not realise the impact they could now have. This change might motivate better budgeting and financial planning but also limit credit access for some.

Financial Pressure Ahead for Vulnerable Borrowers

While this move is designed to protect the credit industry, it may hit vulnerable consumers hardest—especially those living paycheque-to-paycheque.

“Low-income earners or those living payday-to-payday are more likely to rely on overdrafts to cover basic expenses,” warns Coetzee.
“Reporting overdraft usage could disproportionately affect these groups, as their financial struggles will now be more visible to credit providers.”

As a result, consumers who are already under financial strain may face reduced access to credit and be pushed toward unregulated lenders, risking high interest rates and predatory practices.

Coetzee also cautions that not all overdraft use is a sign of financial distress:

“Some consumers use overdrafts strategically, such as for short-term cash flow management. However, frequent or prolonged overdraft usage could be misinterpreted as a sign of poor financial health.”

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A misinterpretation could lead to unnecessary damage to your credit score—especially if you’re unaware of the reporting change and continue to use your overdraft as before.

“This is especially concerning for those who are unaware of the change and continue to use overdrafts as they did before. A lower credit score could limit your access to affordable credit options, insurance products and even employment opportunities in certain sectors,” Coetzee says.

Stay Informed: What You Can Do Now

Now more than ever, consumers must take control of their credit health. Coetzee recommends starting with a free annual credit report to check your standing and spot any errors.

“Request your free annual credit report from the major credit bureaus to ensure accuracy and address any discrepancies.”

If you’re struggling to stay out of your overdraft, it’s time to rethink your budget and explore ways to cut costs or boost income. If the pressure becomes too much, don’t wait—seek help.

“Debt counselling can help you to restructure your debt, negotiate with creditors and create a sustainable repayment plan,” Coetzee advises.
“Consolidating them into a single loan with a lower interest rate could make repayments more manageable.”

Ultimately, this change could encourage smarter financial habits—but only if you’re aware of the risks and ready to adapt.

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