The truth about your credit score

As the old saying goes, ‘In order to get credit, you need credit.’ While this is true, South Africans are in over their ‘salaries’ in debt.

According to data from the National Credit Regulator, of the 28 million credit-active consumers, more than 36% have impaired records, and of these, 22% are three months or more in arrears, while 11% are blacklisted.

In an article published by Business Report, RCS deputy CEO Mariné van Brakel said, “Studies have shown financial literacy to be a foundational element in effective debt management.”

“By understanding how credit scores work and what affects them, South Africans can actively improve their financial standing by using credit to their advantage,” she explained.

Additionally, she listed factors affecting the nation’s credit scores – which include:

Payment history – Consistently ensuring you are making the minimum payments on your accounts is essential and demonstrates positive financial habits. To avoid a negative impact on your score, like late or missed payments, it is advisable to set up debit orders or reminders.

Credit utilisation – Consumers must be mindful when spending credit as this measures the amount of credit available in comparison to outstanding balance.

Length of credit history – Having a longer credit history provides a track record of how you handle debt over time.

Recent credit application – While it is amazing to receive loan offers, applying for multiple loans or new accounts within a short period can negatively affect your credit score.

While getting your finances in check can be daunting, once you have crunched the numbers and know where you stand, it is vital to start making repayments on time in a bid to start reducing your debt.

With a better credit score, consumers have more options, including negotiating better loan terms, lower interest rates, and access to a wider range of financial products.

“Understanding credit is not just about avoiding debt; it’s about using it as a tool to enhance financial stability.

“By taking proactive steps to manage credit responsibly, South African consumers will be better positioned to build a stronger financial foundation for their future,” Van Brakel concluded.

Source: MSN.com

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