Improving Your Credit Score In South Africa

by | Dec 9, 2014 | Consumer Credit Checks , Credit Check | 0 comments

5 Tips for improving your Credit Score in South Africa:

Our team at i-Check Data Solutions have put together this article about how you could improve your credit score in South Africa in five easy tips. South Africa is just starting to emerge from a period of historically low-interest rates, credit was easy to get and installments were affordable for the first time in many years. Consumers went made and racked up so much debt that they are now struggling to make consistent interest and principle payments. What many consumers do not realize is that when they are late of unable to make a scheduled payment, their credit rating suffers.
This ultimately reduces your creditworthiness in the eyes of potential credit providers, and it inhibits your ability to access future financing.
We have good news though, by following the tips in this article consumers with less than stellar credit can do a lot to improve their standing among credit providers and start the process of rebuilding their credit score.
Credit Score? What’s That?

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

It is hard not to have an overstuffed wallet when almost every retailer you visit now has an in-house credit card they’d be ever-so-happy to sign you up for. While these cards often give bonus points, free merchandise or favorable rates, the bad news is that the more open accounts you have, the lower your credit score will be.From a credit bureau’s perspective, the logic behind this is that you could theoretically tap all of these credit sources to the max at one time and rack up a huge amount of debt. In other words, credit agencies and lenders are worried about your potential for taking on high-interest debt, as well as the likelihood that you probably maintain small balances on each of those cards. If they don’t have an outstanding balance the easiest solution is to simply call and cancel the cards.If you have balances on numerous cards right now, one excellent solution is consolidated your debt. Taking a personal loan from the bank will be at a lower interest rate than what you are currently paying on store cards and a credit card. However, if consolidation doesn’t sound attractive, consider paying off the debt that has the highest interest rate first, and close out your accounts one by one as you pay them down.Once you are on top of your credit and store cards, you should focus on reducing a number of cards you have to one or two credit cards, it will also make paying off your bills simpler. Over a period of time, you will get used to using debit cards over credit and this will have a great improvement on your overall credit score. Tip No.5 – Add Comments to Your Credit Report
If you start to get into the habit of reviewing your credit report, you will often see that errors are present. Perhaps you’ve paid off a particular loan that isn’t reflected on the report, or there are legitimate reasons why a particular debt hasn’t been satisfied, such as a temporary disability. In these instances, your first recourse should be to contact the credit agency and request they make the appropriate changes. Once again, you need to take responsibility for your personal credit health, you can’t rely on credit providers to take steps to make sure they are on top of letting the credit bureaus know of debts that have been settled.
If you request your credit report and notice that parts of it are not accurate, then you must take steps to provide supporting documentation and inform the bureaus and credit provider of the mistake and then follow up to make sure the changes have been made and are now reflected on your profile. Making sure that all your particular information is correct and up to date is definitely going to help with your credit score, especially if paid up debts are still reflected as active.

A low credit score isn’t the end of the world:

A low credit score is not the end of your financial world. Working hard and being disciplined can help you to rebuild even the lowest credit scores. Paying more than the minimum, reducing the number of cards in your wallet, negotiating a payment plan and taking advantage of the comments section on your credit report can all help boost your score and improve your odds of success the next time you need a loan.