How can I improve my credit score?

 

Your credit score is a number that reflects your creditworthiness and how likely you are to repay your debts. A good credit score can help you qualify for better interest rates, loan terms, and credit products. A bad credit score can limit your access to credit and make borrowing more expensive.

 

There are some steps you can take to improve your credit score in South Africa, such as:

 

• Review your credit reports: You can get a free copy of your credit report from each of the major credit bureaus (TransUnion, Experian, and XDS) once a year. You should check your reports for any errors or discrepancies and dispute them if necessary. You should also monitor your credit score regularly to track your progress and identify areas for improvement. 
• Get a handle on account payments: Your payment history is one of the most important factors that affect your credit score. You should pay all your accounts on time and in full every month, including your loans, credit cards, utilities, telephone and rent. If you have any overdue or missed payments, you should contact your creditors and arrange a payment plan or settlement. Paying off your debts can boost your credit score and reduce your interest charges.
• Aim for 30% credit utilization or less: Your credit utilization is the ratio of your outstanding balances to your available credit limits. The lower your credit utilization, the better for your credit score. You should aim to keep your credit utilization below 30% on each of your accounts and across all of them. You can do this by paying off your balances, increasing your credit limits, or consolidating some of your balances to a lower-interest personal loan.
• Limit your requests for new credit: Every time you apply for new credit, the lender will perform a hard inquiry on your credit report, which can lower your credit score temporarily. Too many hard inquiries in a short period can also indicate that you are desperate for credit or a high-risk borrower. You should only apply for new credit when you need it and when you are confident that you will be approved. You should also space out your applications and compare different offers before choosing one.
• Make the most of a thin credit file: If you have a thin credit file, meaning that you have little or no credit history, you may find it hard to build a good credit score. However, there are some ways to establish and improve your credit profile, such as getting a secured credit card, becoming an authorized user on someone else's account, or applying for a small loan with a co-signer or guarantor. You should use these options responsibly and pay them back on time to show that you are a reliable borrower.
• Keep old accounts open and deal with delinquencies: The length of your credit history is another factor that influences your credit score. The longer you have been using credit, the more information the lenders have about your behavior and habits. You should keep your old accounts open and active, as long as they have a positive payment history and low balances. Closing them can reduce your available credit and shorten your average account age. You should also deal with any delinquencies on your accounts, such as collections, judgments, or defaults. These can stay on your credit report for up to five years and hurt your credit score significantly. You should try to negotiate with the creditors or collection agencies to remove them from your report or at least mark them as paid.
• Consider consolidating your debts: If you have multiple debts with high interest rates and different due dates, you may find it hard to manage them and keep up with the payments. Consolidating your debts means taking out one loan to pay off all or some of your existing debts. This can simplify your finances and lower your monthly payments. It can also improve your credit score by reducing your credit utilization and diversifying your credit mix. However, you should only consolidate your debts if you can get a lower interest rate and a shorter repayment term than what you currently have.
• Use credit monitoring to track your progress: Credit monitoring is a service that allows you to access and monitor your credit reports and scores from different sources. It can help you keep track of any changes in your credit profile, such as new accounts, inquiries, payments, or errors. It can also alert you to any suspicious or fraudulent activity on your accounts that could harm your credit score. Credit monitoring can help you stay on top of your credit health and achieve your financial goals.

 

You can click on the links for more info:

Sources:

1.  How to Improve Your Credit Score In South Africa - 2023/2024 - SAFACTS. SAFACTS link
2.  Five Steps to a Better Credit Score - TransUnion South Africa. Transunion link
3. How to Build a Credit Score: 10 Tips to Improve Your Score - Investec. Investec link
4. How to build your credit score from scratch | ClearScore ZA. Clearscore link