Updated 01.06.2021

7 Smart Ways to Improve Your Credit Score in South Africa

Many people are either misinformed or have absolutely no idea about their credit scores. As long as you pay your loans on time, you’re good right? This is partly true, but if you want to build and improve your credit record in South Africa, you have to do more than that.

What is considered a good credit score in South Africa? A rating of at least 680 is enough to get you classified as someone having a good credit standing; the higher the number, the better.

Do you know how long it takes to improve your credit score in South Africa? It can take a few months to a number of years, depending on how you manage your debts.

Smart Ways to Improve Credit Score in South Africa

If you’re fed up with getting loans meant for those with low credit score, follow the steps below and you’ll surely improve your credit score.

1.   Apply for a loan

How can you improve your credit score in South Africa if you don’t have a loan or credit card in the first place? Get a loan or a credit card and show creditors that you can handle debts well. This is how you build your credit record in South Africa.

Having different types of loans can be considered a good indicator of your financial management skills. A mixture of retail credit cards, home loan, cell phone contracts, and credit cards may be beneficial to your credit rating, as long as you know how to manage all of them. If you’re not able to keep a healthy record on any one of these, limit yourself from opening any more loan accounts. This can lower your credit score, especially if you mismanage just one of them.

Close one first and make sure you do it without incurring repayment issues. Allow at least six months up to a year before you apply for another loan or open another credit account.

2.   Pay bills on time

A lot of people don’t know that this is the greatest factor that affects their credit score in South Africa.

Many creditors are lenient with repayments and provide a grace period to their clients. This is why many people procrastinate paying on their due date. They think it’s harmless to pay a day or a week late as long as they pay the minimum amount required.

The manner in which you pay your balances is recorded in your payment history. Creditors love people who pay on or before the due date. Those who pay late are seen as delinquent payers, even if they pay the minimum amount required.

3.   Pay a little extra

You may think that it’s fine to repay only the minimum amount required by your credit card provider each month. Do you know that this practice negatively affects your credit score?

It’s highly advisable to pay more than the minimum – that’s the principal, including interest – before the due date. If you can add a little more, then that’s even better. This way, you’ll slowly shed more off your balance and make repayments easier for the following months.

4.   Avoid maxing out your credit limit

Maxing out your credit limit is not a good thing to do if you want to build a good credit record in South Africa. Creditors will see you as someone who won’t be able to pay debts on time. Moreover, you’re likely to default on your debt if you borrow more than what your monthly income can afford to repay.

Do you know what’s considered a good credit utilization ratio?

Credit utilization ratio is determined by comparing the balance you accumulated in using the card with the card limit itself. To be on the safe side, you should use only half of your credit card limit; even better if you use only around 30% of it.

If your credit limit is R10 000, this means you should maintain your balance at R3 000 to get a good credit score in SA.

This is the next biggest factor that determines your credit score in South Africa, next to your payment history. Following this rule of thumb is one of the ways to build a good credit record in SA.

5.   Keep accounts with good credit standing

Creditors take into consideration the age of your credit account. The longer you maintain it, the better, especially if it’s in a good credit standing.

A lot of people think that if they close the credit account they defaulted on, they can start with a clean slate right away. This is not true, since it may take more than a year before your bad account gets removed from your credit history.

Within this period any credit account under your name will still be included in your rating assessment, regardless if you close or let it remain open. This rule applies to accounts with either bad or good credit standing.

6.   Choose when to get a loan

The frequency you apply for a loan can negatively affect your credit score in South Africa. Creditors will see that something has changed with your financial situation if they see you applying for too many loans at once.

7.   Check your credit rating

It’s not bad to check your credit rating. Sadly, many people don’t check their credit ratings or get their credit reports for fear of decreasing their current standing. This is a common misconception that should be removed from your system.

Studies reveal that the majority of the credit card and loan holders in South Africa have no idea what their credit score is. How can you know what to improve on if you’re not asking for an assessment?

How do you check your credit score in South Africa?

The NDA, Experian, and TransUnion all provide free credit score check to clients every year.

Get your credit report and check if there are any negative information listed under your name. Information on your credit history that’s publicly available includes administration orders, debt judgments, and similar verdicts issued by the court. All these pertain to your inability to fulfill your debt obligations to your lenders.

When this happens, take all necessary actions to repay all your outstanding loans. If you find any inaccuracies or mistakes written on your credit report, contact the credit bureau immediately to resolve these discrepancies. The same goes if you feel that you’ve become a victim of identity theft.

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