7 Effective Tips to Improve Your Credit Score in South Africa

Are you looking to improve your credit score? Your credit score may seem like any other number, but this number plays a major role in your life and finances. That’s why it is essential to make sure your credit score is nice and healthy. You can do that by establishing good financial habits to help boost your credit score.

In this article, we'll give you a clear picture of what your credit score is, how a healthy one helps you and how you can maintain or improve your credit score in South Africa!

What is a credit score?

Your credit score is a three-digit number that represents your credit behaviour. Based on your credit report your previous payments, debts and financial activity are calculated into a number to indicate to banks and businesses whether or not you’re a risk.

What is a good credit score in South Africa

Credit scores are a 3 digit number between 0 and 999. It typically ranges between 300 and 850 but a good credit score will be above 610, as anything below that is considered high risk. A credit score above 800 is considered excellent.

Benefits of a High Credit Score

Having a good credit score opens many financial doors whereas having one below 610 slams many doors shut. Here are some benefits that prove the importance of a high credit score:

• Get approved for higher credit limits.

• Increase your chances of getting approved for credit cards and loans.

• Lower your interest rates on credit.

• Help you buy a house.

• Make it easier to get a cellphone contract.

• Increase your chances of getting approved for renting a home or apartment.

• Help you buy a car and decrease your car insurance rates.

7 Simple Tips on How to Increase Credit Score

As you can see, a good credit score makes life so much easier. But the question is — How do you get a high credit score? It’s actually pretty simple. Here are our top simple tips to improve your credit score so you can start living the life you want to live.

1. Check your credit report

Checking your credit report is the best place to start if you want to increase your credit score, as you can find out what your credit score is and see what you’re working with.

Plus, you can check if any mistakes were made on your credit report, like late payments that weren’t actually late. This is a quick way to earn back some points.

Where can you get your credit report? South Africans have access to one free credit report per year. All you have to do is contact one of the major credit bureaus, like TransUnion.

2. Make your payments on time

Consistency is key! Your payment history is a major factor when calculating your credit score. This is why it is essential to make your repayments regularly and on time, as even a few days late can negatively affect your score.

A late payment will stay on your credit record even if you pay it all off eventually.

If you’re struggling to make the payments on time, a good trick is to create a reminder in your calendar or diary.

3. Pay off your debts

While this isn’t always possible, the goal should be to pay off all your debt, as you not only get to live debt-free but any outstanding debt makes a big impact on your credit score.

It’s best to start with your credit cards, as those have the highest interest rates. While you can opt pay the basic monthly instalments, adding a bit more when you can, like an end-of-year bonus or any spare cash at the end of the month, makes a massive difference.

Even if it's small, you should create a realistic repayment plan that helps you prioritise paying off your debt.

4. Avoid spending up to your credit limit

Remember that you don’t have to use all your credit every month. In fact, for a good credit score, it’s recommended to keep your credit ratio below 30%. For example, if your credit card limit is R10 000, then try to owe less than R3 000.

You can help your credit ratio by increasing your credit limit, but keeping what you owe the same.

5. Settle and close any accounts you don’t use

Having too many accounts open can negatively impact your credit score. So it’s best to close any accounts that you don’t really use, as it reduces the number of accounts attached to your name, plus it’s less admin for you.

Just make sure to settle the accounts before you close them. You can contact the relevant credit provider to ensure that your name is officially off their list once you’ve settled.

6. Limit requests for new credit

If you’re trying to improve your credit score, avoid requesting more credit, creating more debt and opening new accounts. It’s not only the increase in credit, debt and accounts that harms your credit score but also the fact that every time someone does a credit check on you, it negatively affects your score.

Additionally, if you have many credit applications open at the same time, it appears to creditors that your financial situation has changed, increasing your risk and your credit score.

7. Seek assistance from debt counselling

If your credit score is quite low and you’re struggling to improve it and get out of debt on your own, why not ask for some help? A professional debt counsellor can work with you to create a realistic and achievable budget and payment plan. Plus, they can even approach creditors on your behalf and make arrangements to help you pay off your debt in a reasonable way.

You can even approach creditors yourself and keep them informed about your financial situation. While it won’t increase your score immediately, you may be able to negotiate your payment plan which will help your score in the long run.

Conclusion

Just follow these simple tips and your credit score will be soaring in no time. Paying off your debt is no simple task, but it will be so worth it when you see your credit score increase and you open yourself up to so many opportunities. Just focus on creating good financial habits and step by step, it will all become second nature.