By Scelo Hlophe
We all do aspire to have an improved credit score for many different reasons. Part of the reasons are about being in a good position to get credit approval from the different credit providers we hope to get finance from, employees check your credit record for the purpose of employment, Estate agencies and landlords conduct credit check for the purpose of rental leasing.
There are many reasons why you could have low credit score and the great benefit is that you can improve it and it is not the end of you if your score is low. There also is no certain figure that is considered as a perfect score but the higher your score the better chance you stand to get credit approval. Different credit providers have their own risk assessment criteria. You may have a high score but that score for lender A may not be good for them. Maintaining a great score is not only beneficial for being grated credit but rather to receive competitive interest rates as well.
Here are some tips that can help you to improve your score:
How you pay your creditors is very important. You need to make sure that you pay your debts on time and the agreed minimum installments. A payment that is received late may affect your score even if it is just few days late. Insure that you communicate with your creditor in advance if payment will be made late before they take the information to the credit bureaus.
A good mix of credit
A good mix of credit is crucial in helping you stand a better chance and to help you rebuild your score. There are 2 types of credit, secured debt and unsecured debt. A Secured a debt is credit that is linked and protected by an asset, for example, Home loan, Vehicle loan, Mortgage, Building Loan and an unsecured loan includes a personal loan, credit card, clothing account, overdraft, revolving loan. They also are divided to long term and short term. In order to increase your score, a good balance of these accounts can help you to look good. Remember that unsecured debts are high interest bearing.
Did you know that when applying for credit, a credit provider would go to the credit bureau’s to conduct an assessment with the purpose of granting you credit. They also do this to assess how you manage your accounts. Mbureauany people fall victim of playing around numbers on the internet to try and see if they could be granted credit. When a provider does a check on you, that information would remain on your profile for about 2 years. Avoid making too much credit application around the same time as that can show to others that you are desperate and very credit hungry. Too many credit applications show creditors a signal that there might be something wrong with your finances and hence you are on every website and applying for credit and in strong need of money. That does affect your score.
Duration of credit profile
The longer you have had credit the easier it is for creditors to assess your credit behavior. It is important to build a credit profile and maintain it well. Creditors are more able to trust that you will pay if they are able to reference on your past credit behavior. In doing so, avoid going on a credit shopping spree when trying to build a credit profile. A few different accounts is all you need and insure to maintain the repayment and not default on your payments
It is very important to insure that you do not max out the credit balance you have. If you have a credit card with a limit of R10 000, try to not go above R3500 on it, with a clothing account with credit availability of R3 000, try and use below R1 200. This may also help you as the more money that you take out, the bigger the amount you owe to and therefore may put you in the risk of being overcommitted even though you have a good credit score but as per your credit record you may not be able to afford to pay back and therefore you may be a risk.
Above the above point, it is important to know and understand that you have the complete control of your credit and only you can be able to fix it and stand a better chance of credit approval. If you have any judgements, summons and defaults it is important that you pay all the outstanding amount and get payment letters from the creditor and send it to the credit bureau so that that negative information can be removed from your name. Credit bureaus get information from Credit providers and therefore it is important to insure that you communicate with your creditor when you are unable to pay so that they can draw up a payment restructuring plan and avoid the creditor taking that negative information to the credit bureau’s because you do not communicate and therefore may cause a dent on your profile.