5 Tips for improving your Credit Score in South Africa:
Your credit score is the key to understanding how your creditworthiness is evaluated by lending institutions, as a good credit score can unlock the vault to help obtain financing.
Your entire payment history, all loans outstanding and a general indebtedness are statistically evaluated by credit bureaus. The big four in South Africa currently are Trans Union, Compuscan, XDS, and Experian. Based upon a compilation of that data, your profile is assigned a number between 300 and 850, with 300 being the least creditworthy and 850 being the most creditworthy.
It is this credit score that credit providers use as a basis for determining whether you qualify for a home loan or car finance. So, now that you understand how the score works, let’s look at five tips that will help you raise a bad score and win favor with these cut throat credit providers.
Tip No.1 – Pay More Than the Minimum
If at all possible, try your best to make payments over and above the minimum interest payments that are due. Credit bureaus not only look at the amount of debt an individual has outstanding but also the length of time it takes to pay off the debt.
Unfortunately, we cannot tell you exactly how much this will boost your credit score, There are a lot of factors that go into computing a credit score, but make no mistake accelerating payments and satisfying debts on a timely basis is recommended as a means of repairing credit by lending institutions.
Tip No.2 – Work Out a Plan with your credit provider
Credit providers are really going to try and help clients who come forward and open up about a trying time and issues with regular payments. If you come clean with your credit provider, most times they will attempt to negotiate a revised payment plan that can help take off the pressure. This means you get some relief and your credit profile isn’t negatively affected. Simply ignoring the calls to payment and not proactively engaging with your credit providers will be to your detriment. What you need to realize is that for a credit provider to find a middle ground with you and keep you as a client is often cheaper than handing you over to a debt collection agency or worse writing off the debt entirely. So at all times try to not run away from your obligations, try and get help and restructure the debt to a level you can manage.
If and when a deal is struck to forgive a portion of your debt or restructure it, be sure to inform the credit bureaus above about the changes. Do not rely on the credit provider to do this, you need to take responsibility and make sure that the appropriate notations on your credit report are made. The basic rule of thumb is that the less debt you have and the more timely payments made on outstanding debt will equate to a higher credit score.
You are able to get a free copy of your credit report annually from any of the credit bureaus mentioned above. We advise that you access your report at least three times a year to make sure your information is accurate. You can purchase a copy of the report from i-Check Data Solutions for R 20 ex. vat, this is a tiny amount to spend for the for the powerful report you will receive.
Tip No.3 – Switch from Credit to Debit Cards
The credit card debt is no friend to your credit score. One of the easiest ways to avoid credit card debt is to pay the debt right away, through the use of a debit card.
Debit is different from credit. With a debit card, you deposit money into an account and then use the card to charge the money. There is no credit bill to rack up, and you can only spend what you actually have in the account.
It is important to note that credit reports don’t typically factor debit card payments into the credit score equation. But by disciplining yourself and using a debit card to settle debts on the spot, (rather than racking up huge credit card balances) you will, by extension, have a better credit score.
Tip No.4 Cut Up Those Store Cards
A low credit score isn’t the end of the world: