There are different ways to improve your credit score in South Africa but not all of them are straight forward. Because your financial history is one of the most important things to your name. The following three practical ways to improve your credit record could stand you in good stead financially.
The easiest ways to improve your credit score include:
- Pay off debts quickly
- Close accounts that are settled
- Lower your debt ratio
Why is a Good Credit Score important?
In order to buy a vehicle, purchase a piece of property, open a shop account. Or get a cellphone account or qualify for a personal loan, you must have a good credit score in South Africa.
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All reputable financial service providers will want to see two major things before they approve your credit.
- They will want to see that you have a steady, reliable income. That will cover all of your essential living costs and your monthly loan re-payments.
- They will want to see that you have always paid your debts and accounts in full and on time in the past.
Without these two things your only choice for a loan will be a loan shark agency. Who you will probably never be able to pay off.
It is therefore essential for your future, financially and otherwise, to take care of your credit record and make sure it is a good one.
What is a Credit Rating?
If you are an active credit consumer you will have a credit rating determined by how good you have been at making your payments.
Some financial service providers use this rating to determine how much interest they will charge you on a loan or whether they will grant you the loan at all.
Your credit rating fluctuates up and down over time, depending on your payment behavior.
Three Practical ways to Improve your Credit Score
If your credit record is not looking as good as it should, there are several ways to make improvements.
The essential thing is to start NOW and not to wait until it is too late.
The following three ways to improve your record are not quick fixes, but they will help you to improve your credit score.
- If you have had an incident of non-payment, it will show affect your credit rating and history for two years. And show up on your credit profile for five years. After that it will be wiped clear. The best way forward is to pay all your debt religiously and in a few years time, you will have a sound credit record.
- The number of accounts you have on your credit record will affect your chances of being granted a loan. Even if all of your accounts are paid up, potential creditors may consider you a high risk. And may be wary of granting you a loan in terms of affordability on your part. It is best to close any accounts that are paid up to clear up your credit profile.
- Debt ratio is another factor that mars your credit record. Your debt ratio is the difference between what you owe and your credit limit. This gap should be as wide as possible. So attempt to pay off your highest interest ratio debt first as well as any that is reaching the maximum limit.
Extra Finance Tips
The above are three of the most important and practical ways to save your credit record, but the following tips will help you as well.
Do not apply for too many loans at once. All of your loan applications show up on your credit record. And even if you are simply casting the net wide looking for a financial service provider who will approve you, you may look like you are committing fraud. Or you may simply look reckless. Neither of these perceptions will be good for your credit record.
Do not apply for credit unless it is absolutely essential. Credit is not a quick fix to your financial problems. You should consider the terms and conditions, long term and short term, before getting into debt.
Do not go to a credit repair agency. There is no need for this as they will undoubtedly charge you a large amount and not do much for your credit record. Many of these agencies are actually loan sharks.
So we have learnt three ways to improve your credit score in South Africa and they are easy enough to implement.
Therefore once your score improves you will have access to more finance options.
A decent financial record will show lenders and credit providers that you are responsible with your money. So you will have a good chance of increasing your credit score even further.