How to BOOST your credit score in South Africa

Many South Africans are taking the plunge and getting into homeownership. 

Becoming a first-time homeowner is a massive decision for anyone and needs to be considered carefully. People must have all their ducks in a row and consider the wide variety of factors that could affect their credit scores before making their applications.

When you apply for credit, the financial institution you’re applying through will pull a credit report from one of these four bureaus. The report typically includes:

• A two-year history of all the credit you’ve applied for
• The credit accounts you have and your payment history with them (including any late or skipped payments)
• Any court judgments or defaults you may have against you

All this information is then compiled into a single credit score (we’ll discuss in the section below). A credit report is a snapshot of your financial behaviour that reflects how you manage your debt and reflects how much of a credit risk you’re likely to be.

There are several questions future homeowners should ask before approaching the bank for a home loan, including: “Is your credit score as ready as you are to buy your first home?

Getting a loan might seem an accessible option, but it’s a big decision to make. One of the main things to consider is one’s credit score.

Your credit score is a good reflection of your credit health. The good news is, your credit score isn’t fixed, and if you do find your score a bit low, you can always improve it:

• If you have no credit score, try opening some small retail accounts or a cell phone account, and pay it back on time and in full each month. 
• Try to settle the outstanding debt as quickly as possible.
• Do not take on any more debt.
• Reduce spending wherever you can. The less credit against your name, the lower your risk. Close all accounts you’re not using. Creditors assess the full facility of your credit agreements, even if they’re not being used.
• Do not miss payments. High outstanding debt will negatively affect your score while paying it off will improve it. Demonstrating regular debt repayments shows you’re capable of managing your finances. And while you only need to pay the minimum instalments, paying a little more every month is best.
• Stay informed of what your credit score is.

• Keep your credit limits high and what you owe low

•  Timely payments will increase your score. Creditors want to know how well you honour your contracts (any late or missed payments will reflect poorly). If you do fall behind on repayments, try to get back on track ASAP.

• Know your rating

  South Africans are entitled to one free report per year from credit bureaus, additional reports can be obtained at a small fee. Ensure all your record information is up to date and accurate before applying for large loans or additional credit.

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Being able to pay the bond is not the only thing first-time homeowners will need to worry about. Purchasing a home comes with several other costs that prospective buyers need to be aware of. For example:

• Transfer and bond registration costs are things that will need to be budgeted for. These are variable costs linked to the purchase price of the property and the size of the bond registered amount. They can be pretty expensive, depending on several variables.
• The bank initiation fee is also a once-off administrative payment made to the bank that is prescribed by the National Credit Act

Do you know your credit score?

You can find a list of SA credit bureaus at the Credit Bureau Association website, with links to their individual sites. Choose a bureau, and all you need to do is create an account, provide details like your ID number, and you’ll receive your report within a few minutes

According to businesstech.co.za, improvements usually start showing up on the credit record after around three months, but it’s recommended to wait about six months before reapplying.

More info/Need assistance?

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