For most of us, credit is a necessary reality of life. It is difficult to save for larger purchases and almost impossible for most people to pay cash for a car or buy a house without a bond. Having a good credit score is important as it will make necessary credit easier to come by and will often mean you get a better interest rate than people with a lower credit score. The tricks to improving your score are not difficult and it is in your best interests to follow them.
The following 10 hacks will be easy to apply and help improve your score.
1. Understand your current debt situation
Before you can go about fixing your credit score, you need to know exactly where you stand. To get your free credit score, you can go to MyCreditStatus.co.za where you will get access to your score which makes up 7% of your total profile. You can also upgrade to a premium credit report which will show you your entire credit profile as seen by lenders.
Study the report carefully and get a good understanding of your situation and your payment history. Any areas of concern should be fairly obvious so work on improving the worst of them first.
2. Check the report for errors
You will be surprised how often this happens. When scrutinising your reports, check for any errors and take steps to have them removed. Approach the bureau to rectify the error and if it is not resolved in a reasonable amount of time you will have to take it up with the Credit Ombudsman.
3. Draw up a detailed budget and stick to it
This is such an important aspect of good personal financial management yet so few people actually follow it. You would not run a business without a budget and your personal finances should be no different.
Try to concentrate on correcting the ones that reflect poorly on your credit report first and then focus on the debt with the highest interest rate.
4. Live within your means
Following on from the above, the budget will give you a realistic idea of your income versus expenses. As tempting as it can be with so much credit available to the average consumer, avoid the temptation to live beyond your means. Try to save for those luxuries and take care of the necessities first. Also, try to put away some money for unforeseen expenses.
5. Pay your accounts on time and pay the full amount due
The most important aspect to maintaining a good score or improving a bad one is to pay what is due and pay it on time. It is as simple as that. Payments that are late or short will immediately reflect badly.
6. Keep repayments below 30% of your income
Affordability is, rightly so, a big factor in granting credit. The NCA (National Credit Act) stipulates that your monthly debt repayments may not exceed 30% of your income.
7. Improve your credit utilisation
Another important factor is the amount of debt you have in relation to how much credit is available to you. A good goal is to aim for around 30% credit utilisation. Work on reducing those debts where your credit used is close to your credit limit.
8. Minimise credit inquiries
Only apply for credit that you need and intend to use. Multiple inquiries will reduce your score and possibly raise red flags with credit grantors.
9. Stability will improve your credit score
Credit providers like to see stability, and the longer you have worked for a company or lived at one address, the better your score will be.
10. Act quickly when there is a problem
If for some reason you are unable to meet one or more of your monthly commitments, speak to the company and come to an arrangement with them. Avoiding the situation will not help. The short or late payment might still appear on your report but you can possibly avoid an adverse report or a default.
Maintaining a good credit score is not difficult with a bit of budgeting and planning. Follow these basic guidelines and you should have no issues with keeping your score looking good.
To get your personal credit report online today, head over to MyCreditStatus.co.za