By now most of us must have realised how important it is to have a good credit score. Before approaching credit providers that should be the first thing you consider, right?Definitely your score is the first thing that creditors look at when you approach them before granting any form of financial help. Whether you are looking at applying for a home loan, car finance , personal loan, clothing store account and yes at times when applying for a job. As a south African you should always be attempting keeping your credit score high healthy in order to maintain a stress free and normal lifestyle.
The whole purpose of your score is for the creditors to determine the level of risk before they offer any kind of assistance. What creditors simply do is to run a credit check on your profile. They then will come to a decision on whether you are assistance worthy or not. The higher your score the more chance of them giving our assistance. It does not only end the a good score also increases your chances for lower interest rate.
In South Africa we have two main credit reporting agencies. They are called TransUnion ITC and Experian. They see everything; they will adjust your score on all the credit you take out and all the debt repayments which you are making. Creditors will choose which credit reporting agency they will use to get your credit report.
It is very crucial that you work on your score before applying for any form of lending. Bank and all other providers are very careful when it comes to thus is due to the high debt level of South African consumers.
We have prepared a guideline in order for you to maintain healthy credit life
To follow, are steps which you should implement in your life in order to repair your current credit status:
Be prompt in making payments. Make your payments on time!!!!
Always remember that your payment history can take up to 35% of your score. Do ensure that you make your monthly debt payments on time and in full.
Pay attention to your credit cards first
It shows a lot if you make regular payments on your cards first. Keep the balances as low as possible. Cards are also most likely to have the highest interest rates.
Avoid going to court at all cost
If you get a court order your score will be damaged and this can take your years to repair. Do make sure that you never get charged with court order.
Don’t be brave by taking or lured on to much debt
It is advisable that every South African household not to have more than two credit card and the major debts should be home loan and car finance. Please make sure that you do max out your cards. Never take out more debt while still paying of other debts. A rule of thumb to keep in mind is that you should try not to use more than a third of your gross income towards debts.
Keep your credit limits high and your due amounts low
Never ask creditors to lower your limits. Rather just minimize the gap between your due amount and your limit. The financial agencies love to see that you are closing the gap between the two. It will always be cheaper for you to pay of the debts with the highest interest rates of first, but I will suggest that you rather spend your money on the debts which is closest to their limits.
Close unused credit accounts
The less credit lines you have against your name the lower the risk you are towards lenders. You should close all credit accounts that you are not using and tell the creditors to inform the credit bureaus that you have closed the accounts and not them.
Don’t pay your debts from one card to another
This might keep the creditors off your back, but it won’t improve your score on the long run.
Credit repair agencies can cost you thousands
Try to avoid seeking help from a credit repair agency. They can charge you over R5000 to repair your credit score, and there are lots of scammers out there. So only seek help from them if you are really not able to help your self.
Avoid using revolving credit accounts
Revolving credit is debt which you can pay back on your own time. These accounts normally have high interest rates and will cause damage towards your credit score.
No credit history can be bad for you
We all know by this time that by having too much loans is bad for you. You should also know that having too little can also be harmful. The longer you have been an active credit consumer the easier it is for creditors and lenders establish your true worthiness. If you have been a credit consumer for a short while then banks and lenders will see your score as inaccurate, meaning that you have done to little to prove that you are worthy of any additional loans. You might find that you cannot obtain a loan due to you not having enough credit. I would suggest that you option for a card first. They are easier to obtain, but make sure that you will be able to afford the rates and fees. There are many online comparison sites that can help you to find a low rate interest credit card. Just make sure you pay it of in full before the interest rates starts kicking in.
Check your partner’s credit
If you are married then you should know that creditors might take a look at your spouse’s rating. If the other partner’s score is very low then it might affect your loan applications as well.
Don’t wait for the creditors to contact you
If you see that there is trouble ahead, make sure that you contact the creditors as soon as possible. If you see that you will not be able to pay of your debts on time, contact them and make arrangements.
Get a copy of your credit report
It is strongly suggest you obtain reports from both major bureaus. You have to know exactly where you are standing on the credit ladder before you can attempt to improve your score. You should also know that more than 80% of reports contain errors. Go through both reports and make sure that there is no incorrect information on them.