How to manage your credit score

2016-04-13 06:00

YOUR credit score is an important part of your financial profile.

It is what helps banks, finance companies and other credit providers decide if they should lend you money.

Marlies Kappers, head of marketing at Direct Axis, through Meropa Communications, provided some useful tips that can help one avoid a low credit rating.

She said in a press statement that a person could be considered a high risk and as a result might not be given a loan, or could be charged a higher interest rate to compensate for the additional risk if he has a low credit score.

Explaining further, Kappers stated that credit bureaus calculated credit scores, but this did not mean you are not able to do anything about managing your score.

Here are some tips that could help you avoid a low credit rating or maintain a good one.

  • Check your credit report: South Africans are entitled to a free credit report each year. You can get one from any of the major credit bureaus. It will tell you your score and more importantly, you can check for any mistakes.
  • Pay on time: Your payment record has a significant influence on your credit score. Even paying a few days late can negatively influence your rating. If you have to make regular payments, consider setting up a debit order so you do not risk forgetting about or missing a payment.
  • Reduce what you owe: Use the credit report to list all your debts. Arrange these according to the interest rates charged on each. Try to pay off the ones with the highest interest rates first, while maintaining the minimum payments on your other accounts.
  • Pay off debt rather than moving it around: Limit revolving debt such as credit cards. Do not apply for credit cards or open store accounts to increase your available credit.
  • Tell creditors if you have a problem: Keeping your creditors informed if you are having difficulties will not rebuild your credit score, but, your score should improve over time.
  • Outstanding debts will stay on your record: If an account is overdue it will negatively affect your score. Making any payments or paying it off completely will not clear your credit record, but will improve your credit score.
  • Be aware though that information about your payment profile can stay on your record for up to five years. Closing an account does not make the payment history go away and it may still be reflected on your credit score.

This comprises your payment history, amounts owed and activity on an account and the age of your accounts – the older the better.

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