Knowing Your Credit Score is Good. Understanding is Better!
Photo Cred: Pexels

Little did I know how our Credit Scores impact many aspects of our lives. Not only does it give you a good indication of your relationship with money and debt but can also help you improve that relationship. By knowing what your current credit score is and understanding your credit profile, you can work towards growing your wealth.

 

Johannesburg, South Africa (27 October 2022) – I have never known my credit score… I’ve actually never known that I could check my credit score and even though I have a credit card, have owned cars (financed by banks) and bought a house (also financed by a bank), I always applied for finance while crossing my fingers that my credit score was a good one.

Little did I know how our Credit Scores impact many aspects of our lives. Not only does it give you a good indication of your relationship with money and debt but can also help you improve that relationship.

Your credit profile is a snapshot of your financial history, and your credit score is the rating given to you based on the number of credit accounts you have, your payment history, and other factors. By knowing what your current credit score is and understanding your credit profile, you can work towards growing your wealth.

And Sanlam has created a fantastic platform to check your Credit Score and give you tools to manage your money and debt better. Now you can understand and manage your credit profile! Conveniently check your credit score, credit history and recommendations all on one dashboard.

How is your credit score calculated?

According to Ayanda Ndimande, head of branch lending at Sanlam, your credit score is based on how well you meet your credit obligations, both currently and historically. If you miss your payments, your credit score will suffer.

Another factor is how often you use credit made available to you and how much you use. Your credit score will drop if you use more than 50% of your credit card balance or loan. The length of time you have actively used credit, Ndimande says, also impacts your credit score.

“The longer the history of credit and on-time payment, the better the score. It’s good to have debt that’s well managed and is taken for good reasons,” she says.

Lastly, the type of credit taken impacts your credit score. Ndimande says a mixture of long- and short-term credit can be favourable.

Knowing Your Credit Score is Good. Understanding is Better!
Photo Cred: National Debt Review

How can you improve your credit score?

Pay your instalments on time

Are you paying your instalments on time? If not, it’s time to make amends.

According to Experian, credit bureaus normally retain your payment information for up to three years, even if you’ve paid the accounts. If you want credit, you can still negotiate with lenders, but you will obtain it at a higher rate.

Some lenders report late payments after 30 days have elapsed. If you’re never late with your payments, you’ll see your credit score steadily going up.

Lodge a dispute

Check your credit report regularly to ensure it’s accurate. If it’s not, dispute it.

Create a repayment plan

If you’ve got a sizeable amount of debt, create a repayment plan. You may want to reduce your spending so that you can free up cash for your debt. You can also consolidate your debt into one amount. This can help you more easily manage your debt and decrease instalments and interest amounts. When you’re paying lower instalments, the chances of missing your payments are reduced.

Don’t use more than half of your available credit

If your credit provider offers you a loan of R50,000, don’t accept more than half of that unless of course, you really need it. Take what you asked for and what you need and consider the ramifications on your credit score.

Don’t apply excessively

In your quest to diversify your credit profile and increase your score, you might actually end up damaging your score. Making hard enquiries will make creditors think you rely too much on credit. Even if you don’t accept it, your credit report will show that you’ve applied.

Keep at least one account open

This can be your store account or your credit card. It’s tempting to close all your accounts so that you can be debt-free. This is not a solution as it will be impossible to track your payment history. Experian notes that you must display good repayment behaviour for at least six months, and up to a year, in order for your score to build up significantly.

Knowing Your Credit Score is Good. Understanding is Better!
Photo Cred: Sanlam Supplied

Getting Your Free Credit Report

Sanlam provides a free tool to help you understand your credit profile to gain an accurate, holistic view of your financial position. And, with access to a credit management coach, they’ll help you learn the difference between good and bad debt, improve your credit score and get back on track financially.

Register, or log in if you already have, and get real about your today with Sanlam Credit Solutions.


Sources: Sanlam 
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About the Author

Brent Lindeque is the founder and editor in charge at Good Things Guy.

Recognised as one of the Mail and Guardian’s Top 200 Young South African’s as well as a Primedia LeadSA Hero, Brent is a change maker, thought leader, radio host, foodie, vlogger, writer and all round good guy.

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