How to get a good credit score
As a consumer it’s vital to monitor your credit behaviour. You have a responsibility to ensure that you service your debt in full and timeously every month.
What is a credit score?
Every consumer who has some form of credit to their name is actively leaving a trail behind them which is used to compile a credit report of their behaviour.
A credit score is a numerical summary of the information that is contained in a report. It is an indicator of the how well an entity has managed their agreements with creditors.
In South Africa, statistics indicate that the average credit-active consumer is regarded as a high-risk borrower.
Having a credit score that is higher than 720 is considered excellent and this is likely to land a borrower the best credit rates. Someone who score in this region is regarded as low risk, which means that lenders are more likely to be willing to offer them credit.
A credit score is calculated by considering information in your credit report, such as:
Payment history
Inquiries
Length of time you’ve had credit
If you find yourself in a position where you have an average or poor score, there are ways to improve, such as:
- Pay what you owe in full and on time
- Don’t apply for more than one loan at the same time
- Communicate with your creditors. If you can’t afford to make repayments, arrange with them to pay lower instalments.
- Keep what you owe lower than a third of your gross income.
Whenever you access credit, make sure you have a plan for how you will repay it and that you are willing to uphold your end of the agreement.
