How to improve your credit score

Nico van Staden

Access to credit can be a cornerstone to personal growth and many consumers can relate to the excitement and relief of qualifying for credit to buy a house, a car or to cover education costs and medical emergencies.

Unfortunately, statistics also indicate that many consumers also struggle to manage credit.

Nico van Staden, Head of Consumer Credit at FNB says while many factors are considered to determine the outcome of a credit application, one of the key factors that credit providers consider is a credit score.

“The easiest way to understand a credit score is to view it as a report card for credit behaviour. When applying for credit, a credit provider will ask you for permission to access your credit profile to better assess your application. Credit providers will also use such information to determine the interest you will potentially pay on your loan,” he says.

Van Staden gives useful tips on how consumers can maintain their credit worthiness and a good credit score:

  • Know your credit score – The starting point is to first understand your individual credit score, regardless of whether you’ve been credit active or not. In South Africa, there are several credit bureaus that consumers can use to access a free credit report at least once a year.
  • Be honest about your financial position – While financial institutions have to perform affordability assessments for every credit application, consumers also have a duty to provide truthful information about their ability to afford credit. It’s important to understand your monthly income and expenditure. Will you be able to service your debt if you have a sudden decrease in income or increase in expenses?
  • Honour your credit agreements – In the credit application process, past behaviour is very important. Avoid going into arrears by skipping payments because this will be reported to the credit bureau and will negatively impact your credit score. This will impair your ability to qualify for future credit. If you are having trouble meeting your current obligations, contact your credit provider and try to work out a repayment plan. Stick to the plan diligently and your score will improve over time.
  • Understand the different types of credit – A credit card, overdraft and a personal loan are very different facilities and the interest you pay on each can be vastly different. Use your banking relationship to understand the use and how best to manage each facility.

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