With August being Women’s Month, this is a timely reminder to become financially empowered. A good start is to find out what your credit status is, and to educate yourself on how to improve your rating.
Your credit score is a profile of your recent credit history, says Sarah Nicholson, the Commercial Manager of the handy personal finance website Justmoney. Knowing your credit score is important because when you apply for a loan, credit providers use this assessment ‒ which reflects how well you manage your debt repayments ‒ to approve or turn down your application. Potential employers may also be interested to know your score as it indicates how responsible you are.
Having a good credit record expands your opportunities in life. It makes it easier to get a bank loan for a car, or a bond so that you can own your own home. You can borrow more at better rates, as creditors have reason to believe that you will be on time with your payments. Knowing how this system works helps you to avoid the dangers of being uneducated about credit, enables you to use credit responsibly, and can save you thousands of rands in repayments.
The first step is to determine your current score.
“The good news is that you no longer have to go through the hassle of having to register with various bureaus, request a credit report from each, and then try to figure out what your actual credit score is,” says Nicholson.
“By simply inputting some data on the Justmoney website, your score is calculated immediately. You can find out where you are placed in a range from A+ (excellent) to an F (poor).”
Justmoney’s partner on credit scores is Kudough Credit Solutions. Answer some questions online, and it will immediately source your credit information from one of four main credit bureaus. This free service can be accessed once a year. See Credit check for your score.
If you want a more comprehensive service with comparative feedback from four credit bureaus, this is available online for a fee. It is important to note that adverse information might be listed by a different bureau than the one you are checking with, and the bureaus do not share information. Kudough also offers advice on how to improve your credit status if that is needed. You can set a personal goal too, and start saving, for example.
Here are some handy tips from Justmoney and Kudough on how to improve your credit score:
Check the fine print. When you take out any credit agreement, make sure you read the documents carefully and fully understand what you are getting into.
Pay your accounts on time and in full. If you pay a day late, or even R50 too little, this will reflect as a non-payment, which will lower your status. If you have missed payments, get up to date and stay there. Set up debit orders if you tend to forget to pay on time.
Reduce your debt use. This means not using all the credit available to you. If you have a clothing account and your credit limit is R1000, keeping your current balance below R600 (60% debt use) and paying regularly is viewed more favourably than keeping it at R950 (95% debt use) and paying regularly.
Build up your account age. If you have been using credit for only a short time, don’t open a lot of new accounts too quickly. New accounts will lower your average account age, which will have a greater impact on your score if you don’t have a lot of other credit information. Also, don’t close accounts you have had for many years, rather keep a very low or even positive credit balance.
Have a good credit mix. Don’t have too many of the same type of accounts. Unsecured credit such as a personal loan and a credit card are fine in moderation. Having more than one of each can decrease your status even if well managed. Secured loans such as home loans and vehicle finance are better and will add more to your status if managed well.
Tackle defaults and judgments. Pay up outstanding debt and negotiate with the credit grantor to remove the default, or pay up so that the judgment is rescinded (cancelled). This will improve your status immediately.
Contact your credit provider if you have a problem. The creditor wants to find a way to help you repay the money you owe and often will be willing to negotiate a revised payment plan based on your affordability.
To find out more about credit: https://www.justmoney.co.za/news/2018/11/20/the-ultimate-guide-to-understanding-your-credit-score/ and https://www.justmoney.co.za/media/3193/your-guide-to-credit-reports.pdf
While working on your personal finance health this month, you can access the Justmoney website for many helpful articles and tools relating to financial wellness. It covers credit and debt best practice, insurance, banking, tax and many other topics.
“We understand that managing your finances can be stressful, which is why Justmoney has made the process easy, fast, safe and convenient. We partner with trusted financial brands and create informative, trustworthy advice for busy, digitally-savvy South Africans,” says Nicholson.