- A report by the National Credit Regulator has found that 40% of credit-active South Africans are facing an impaired credit record.
- Poor credit scores contribute to rejection of home loan applications.
- There are, however, ways to help improve your credit score and an expert suggests how.
The latest statistics released by ooba Home Loans reveal that 15% of home loan applicants are rejected owing to poor credit scores and a lack of affordability.
Rhys Dyer, CEO of ooba Home Loans, says this has a strong correlation to the debt levels recently announced in TransUnion's Consumer Credit Index for the fourth quarter of 2020.
"While many consumers are enjoying the advantages of a lowered interest rate, including lower monthly bond repayments, some are still struggling to repay their debts and keep their credit scores in check," says Dyer.
Out of 54 million consumer accounts measured, the Transunion report indicated rising defaults on credit repayments and weak cashflow. Furthermore, a report by the National Credit Regulator has found that 40% of credit-active South Africans are facing an impaired credit record. This means there has been a significant increase in an individual's credit "risk", according to Dyer.
To qualify for a bond, a credit score rating of 600 or more is required. Dyer advises that, if you're struggling with a poor credit score, or monthly repayment issues brought on by the pandemic, there are some options available. He provides some tips.
Tips to improve your credit score
Try to curb spending on your credit card and using money you aren't able to repay.
"Your lifestyle should match your expenses; for instance, you shouldn't be driving a sports car if you aren't earning enough to comfortably afford this. Scale back where needed," suggests Dyer.
Pay the full amount, on time
Ensure your minimum debt instalments are paid in full, or over the minimum amount if possible, and on time. Failing to do so can damage your credit score.
Avoid multiple credit cards
Having multiple credit cards and loans, as well as applying frequently for new card facilities can weaken your score.
The "right" amount of debt
Having manageable, healthy debt is beneficial, and a credit repayment history is in your favour, according to Dyer. However, too much debt, such as maxed out credit facilities, will negatively impact your score.
Debt reviews and insolvency
Dyer says one should be aware that applying for insolvency or debt review will negatively affect your credit score.