How to improve your credit score

To find your credit score you need to access to your credit report, provided by a credit bureau, which can be done very easily and at no cost. Under the National Credit Act, every South African is entitled to get their credit report for free from a bureau. To get your report visit the websites of the four main bureaus (Experience, TransUnion, Compuscan and XDS), enter your personal details and you will receive your credit report with your free credit score explained.

You should be aware that many websites offer a service to provide you with your credit report, often hidden behind a free trial and subsequent subscription. Be sure to avoid these as you don’t want to pay for a service that you are legally entitled to get for free.

Your credit score is calculated based on the information in your credit report such as your financial history, how and when you repay your debts, any outstanding payments or negative notices against your name and for how long you have been using credit. This information is then used to generate a number which is your credit score.

If your report shows that you handle credit well, repaying loans on time, this will give you a higher score, indicating to a potential lender that lending to you is less risky. Regularly checking your report will allow you to keep on top of any changes in your credit score and adjust your behaviour accordingly.

The important thing to know about a credit score is that it changes according to your financial behaviour, meaning if you’re unhappy with your rating there are actions you can take for an improved credit score. Listed below are some tips on what you need to do to improve your score.

• When looking at your report make sure that all the information you see is accurate, if there is any information which is wrong you should notify both your bank and the creditor immediately as this may be negatively impacting your score and be a case of identity fraud.
• Make sure you pay any bills you have on time. This can be anything from credit card payments, phone bills or vehicle finance payments. These will all affect your score.
• If you haven’t been making a payment on time, isolate that payment and consider why your payments have been late and what action you can take to stop that happening in the future.
• When using a credit card, try not to reach the maximum credit threshold. This is known as a ‘high credit utilisation’ which may make it look to the loan provider as you are too reliant on credit rather than your own income, hurting your credit score. It is generally good practice to try to keep to less than 35% of your limit.
• Not having a ‘credit history’ (e.g. not having a credit card or having paid a phone bill), will negatively impact your score. When you are in a comfortable financial situation, consider applying for a credit card or starting a phone contract to get into the habit of repaying small loans regularly.
• If you do sign up for a credit card, begin by borrowing small amounts of credit each month and paying them off on time. This will show a potential lender that you can manage your finances and borrow money responsibly, therefore improving your credit score.
• If you have any negative notices on your account, such as court judgements or administration orders, try to settle any outstanding debts within these notices and you may be eligible for a ‘notice of rehabilitation’. If not, these notices will remain on your credit report for five years.
• Make sure you keep your contact information up to date with all lenders, if not you may receive a ‘trace alert’ on your credit report from a lender who cannot contact you.
• Be proactive with contacting creditors. If you don’t think you will make a payment on time, contact your creditors as soon as you can and let them know.
• If you have been recently rejected for a loan, isolate which factors within your credit report or otherwise have led to this decision rather than instantly re-applying for the loan.
• If you are struggling to find credit, try not to file too many applications at once. Several simultaneous applications may indicate to lenders that your financial situation has deteriorated.