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Your Roadmap to a Better Credit Score: Taking Control of Your Finances
It’s never too late to take charge of your financial health, and the perfect place to start is by looking at your credit score. If you’ve been feeling frustrated by high interest rates or rejected applications, remember that a bad credit score isn’t a life sentence—it’s simply a number that needs a bit of attention.
In South Africa, the FICO score system is commonly used, and scores typically range from 0 to 999. Your goal? To hit 700 points or higher, which is generally considered a good credit record. This is the magic number that tells lenders you’re a low-risk client.
1. The Essential Starting Point: Know Thyself
Before you can fix the problem, you need to understand it.
- Check Your Credit Report (And Check it Again!): Your first task is to pull a copy of your credit report. You are entitled to a free report every year. Go through it line by line. Does everything look right? Is the contact information correct? Are all the accounts listed truly yours? If you find any errors or details that are inaccurate, report them immediately. A single mistake on a closing date could be needlessly dragging your score down.
2. Mastering the Fundamentals (The Long Game)
These are the habits that define a responsible borrower and will build a rock-solid financial reputation over time.
- Never, Ever Miss a Payment: This is the single most important factor. Consistent, on-time payments prove that you are reliable. If you anticipate a problem making a payment, contact your creditor immediately and try to negotiate a temporary plan. Ignoring the issue is the fastest way to damage your score.
- Automate Everything: If you’re prone to forgetting due dates (and who isn’t?), set up a debit order for every single one of your monthly payments. This removes human error and guarantees that your credit history remains spotless. If you can afford to pay more than the minimum installment, do it!
- Have a Manageable Repayment Plan: If your current debt repayments are drowning you, reach out to your creditors. Sometimes, negotiating a longer loan term in exchange for lower monthly installments can free up cash flow and reduce the risk of you defaulting. It’s always better to communicate than to miss a payment.
- Be Careful with Unsecured Debt: Secured loans (like a home or car loan) are generally viewed more favorably than unsecured debt (like personal loans or store credit). Make sure your financial portfolio is balanced.
3. Immediate Impact Strategies (The Quick Fixes)
Want to see results fast? Focus intensely on these areas. They are critical factors in your score calculation and can often be addressed within a month or two.
- Crush Your Credit Utilization Ratio (The 35% Rule): This ratio is the amount of credit you are using versus the total amount of credit available to you. Aim to keep this ratio at 35% or below. In simple terms: if your credit card limit is R10,000, try to keep your balance under R3,500. Paying down debt to meet this ratio can give your score a significant, quick boost.
- Limit New Credit Applications: Every time you apply for credit, it results in a “hard inquiry” on your report. A flurry of inquiries suggests you might be struggling financially or desperate for cash. Limit your applications to one every few months.
- Settle and Close Old Accounts: If you have paid off a debt or closed an old store account, make sure the credit bureau has registered it as “settled” or “closed.” Furthermore, physically closing accounts you no longer use reduces your available credit *risk* in the eyes of lenders.
A Note on Partnership
If you are married and planning to apply for large joint credit (like a home loan), remember that your spouse’s credit history is also considered. Encouraging them to adopt the same positive habits can double your collective chances of success!
While some negative listings can take years to fall off your report, good habits start paying off relatively quickly. Many people see a noticeable improvement in their credit score within six months of consistently applying these methods. You’ve got this!