Is Your Credit Score Credit Ready for 2021

Updated: Mar 11

Your Credit Score is one of the first factors that Credit Providers look at when considering personal finance applications. A Credit Score lower than 650 is considered with caution.

Your Credit Score is an indication of how you manage your debt and Credit Providers will borrow money to those who follow a disciplined approach to repaying debt. With the above in mind it is really important to adopt the right financial habits for a strong Credit Score.

Here are five key focus points that will ensure that your Credit Score is credit ready for 2021.

1. Pay your contractual installment to Credit Providers on time each month.

Credit Providers borrow money to consumers who follow a disciplined approach in repaying debts. Pay the correct installment on time each month. If you are not good at managing repayments, make use of debit orders to ensure that payment is made on time.

Paying on different days each month is also damaging to your Credit Score. The same applies if you pay less than your contractual agreement in one month and then more in the next. A low Credit Score damages your credit worthiness as well as your chances of being approved for credit.

2. Try not to exceed 30% of your Credit Utilisation.

Credit utilisation refers to how much of your credit limit you use. Credit Providers generally consider a maximum of 30% as a good sign that you are managing debt utilisation properly. As this is the general rule of thumb, Credit Bureaus may reduce your Credit Score by a few points if you go over this percentage. As an example, if your credit limit on credit facilities is R10,000, try not to exceed more than R3,000 at a time.

If you are finding it hard to stick within this limit, consider requesting a credit limit increase or apply for another Credit Card. This can help increase your total credit limit and lower your credit utilisation. However, do not consider going this route if you are not particularly disciplined when it comes to spending. You will definitely cause way more damage to your Credit Score than good. The objective of this article is to improve your Credit Score not to damage it further.

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3. Review your credit report regularly.

Credit Bureaus report information primarily on the basis of information provided by Credit Providers and Service Providers. Incorrect information in your Credit Report can damage your Credit Score. Inaccuracies, fraudulent behavior or clerical errors can only be identified if you review your Credit Report regularly. We recommend obtaining an annual subscription to one of the bigger Credit Bureaus.

There are also Providers of Credit Score and Credit Reports that offer an overall review from the top 3 credit bureaus all in one report.

You can also pull one free Credit Report annually from each Credit Bureau in South Africa. You should do this at least 3 times a year.

Another nice alternative is to view your free Credit Score from Fincheck. They also offer great advice on how to keep improving your Credit Score.

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4. Avoid applying for credit with multiple Credit Providers in short space of time.

A Credit Provider will fetch your Credit Report to assess your financial history each time you apply for credit. This is called a hard enquiry and will reduce your Credit Score by a few points. Credit Bureaus will also flag your credit report if you make more than 3 enquiries over a 7-day period.

To avoid making multiple credit enquiries to individual Credit Providers, consider visiting Fincheck to compare and choose the most suitable Credit Provider for you. Fincheck will base personal finance offers on your financial requirements and the affordability criteria set by the Credit Provider.

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5. Do not forget to regularly monitor credit that you have co-signed.

When you co-sign for credit you become equally liable to pay the credit installment on time and must also adhere to the requirements of the Credit Agreement. Any defaults or late payments will affect both parties Credit Scores. Regularly review the repayment activities on credit agreements to prevent your Credit Score from being damaged.

If unforeseen circumstances have led to your score being reduced, use these 5 key points to improve your Credit Score. If you do there will be a noticeable difference to your score within 6-12 months.

To get a jump start on improving your Credit Score, click on the Fincheck banner below to get your Free Credit Score Today. Fincheck will also regularly provide you with some great free tips to get the job done.

Get Your Free Credit Score Today

We hope this article will help you to go into the New Year motivated to improve your Credit Score.

About our Author

Lauren is a registered member of the National Credit Regulator. Prior to that, she worked as a Financial and Technical consultant for McGregor-BFA (Now INET-BFA). McGregor-BFA provided Trading and Market related data as well as Investment management software to Asset Managers, University Business Schools and Investment entities. Thereafter experience was advanced to the Property Market working as a Project Manager for Propertyi. But it was her career at the IEB in Adult Education that inspired a passion of hers to educate consumers about responsible ways of managing their financial lives and the long term advantages of doing so. It is her belief that financial education should be taught from an early age. By doing so we can create a country that is economically stable, driven not only by work ethics, but by becoming Financially Independent too.

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