A credit score is essential to unlocking more financial opportunities. Your credit score plays a vital role in your everyday financial life. A strong credit score empowers you to make essential purchases and access desirable financial opportunities. However, a poor credit score can be a roadblock, potentially hindering your ability to obtain credit for your dream home.
Understanding your FICO score is a key to financial well-being. Knowing your FICO score and understanding its importance to lenders is supreme. Understanding the power and uses of your FICO score is essential for better financial results. In the building of your FICO credit score, there are five essential factors: payment history (35%), credit utilization (30%), credit history (15%), credit mix (10%), and new credit (10%).
If you’re seeking effective strategies to improve your credit score and boost your creditworthiness, you’ve arrived at the perfect destination. Here, we present valuable tips to help you achieve your goal.
Best Ways to improve your credit score in South Africa:
- Timely Bill Payments
- Retain your old credit accounts
- Regular Credit Report Monitoring
- Fix Inaccurate Credit Information
- Becoming an Authorized User on a Credit Card
- Add rental payment information to your credit report
1) Timely Bill Payments:
To improve your credit score effectively, prioritize timely payments for all your bills. Paying your bills on time is uppermost, as it carries 35% of your credit score. Late bill payments can have a lasting impact, staying on your FICO report for up to 7 years.
Consider marking due dates on a calendar to help with reminders and ensure you get all bill deadlines. If you’re confident in your financial capabilities, setting up automatic bill payments can be a convenient option, but take precautions to avoid potential overdrafts or penalties.
2) Retain your old credit accounts:
Closing an old credit account can also hurt or lower your credit score. The length of your credit history plays a significant role in determining your score. Even if you don’t actively use old accounts, making occasional transactions is beneficial to keep them active.
As long as your old accounts remain open and in good standing, they positively impact your credit profile. Nurturing a long-standing credit history can contribute to maintaining a healthy credit score in South Africa.
3) Regular Credit Report Monitoring:
Obtaining an annual free credit report and diligently monitoring it is advantageous for maintaining a good credit score. Your credit report provides essential details, including information about credit inquiries, outstanding debts, and the entities to whom you owe. Regular monitoring ensures the accuracy and up-to-date of your credit records.
Furthermore, it serves as a valuable tool to detect any cases of identity theft or fraudulent activities on your accounts. Spotting fraudulent or incorrect credit information right away is essential to protect your credit score.
4) Fix Inaccurate Credit Information:
Taking prompt action upon identifying inaccurate or erroneous information on your credit report is essential to maintaining a healthy credit score. If you find any inaccuracies, filing a dispute with the respective credit bureau is recommended.
Credit reporting agencies investigate the raised dispute and undertake necessary steps to solve the situation. No error, such as an incorrect phone number, must be downplayed, even if it appears negligible. Such mistakes could indicate unauthorized access to your account or identity.
Filing a dispute not only ensures the accuracy of your credit report but can also result in swift updates and resolutions, positively impacting your credit score.
5) Becoming an Authorized User on a Credit Card:
Adding a trusted family member or parent is one effective strategy to improve your credit score in South Africa. Add an authorized user on your credit card who holds a higher credit score than yours.
This approach can positively impact your credit score, potentially resulting in an instant increase. It is essential to understand that the effectiveness of this method may vary. However, not all credit card companies report the activity of authorized users to the major credit bureaus.
Therefore, it is advisable to inquire with the credit card issuer regarding their reporting activities before practicing this strategy.
6) Add rental payment information to your credit report:
In South Africa, your mortgage payments are typically included in your credit report. However, rent payments, equally crucial in showcasing your financial responsibility, often must be noticed.
Most landlords do not report your rent payments to the credit bureaus, missing out on an opportunity to positively impact your credit score. Fortunately, there is a solution. Credit bureaus now provide an option for you to report your rent payments. Keep your rent payments from being recognized.
Strategies for boosting your credit score from 750 to 800+
While a credit score 750 is commendable, reaching an 800+ credit score may not significantly impact your financial standing. However, specific issues could be improved to bridge the gap between a score of 750 and perfect credit. Consider taking the following steps to enhance your creditworthiness:
➡️ Lowering Credit Utilization:
Maintaining low credit utilization is essential for a healthy credit profile. In South Africa, keeping the credit utilization of all your credit card accounts below 30% is recommended.
Here are effective strategies to improve your credit utilization:
- Minimize credit card usage.
- Pay more than the minimum, multiple payments within a month.
- Understand credit utilization calculation.
➡️ Reduce Outstanding Debt:
The average South African household carries a significant credit card debt of approximately R36,800. Such a financial burden can quickly become overwhelming, leading to missed payments, defaults, and collection accounts that negatively impact your credit report. Therefore, paying off credit card balances produces positive credit score benefits. You can consider these strategies: Prioritize debt repayment, snowball or avalanche method, budgeting and expense tracking, negotiate lower interest rates, and seek professional advice.
➡️ Avoid unnecessary hard inquiries:
When you apply for a loan or line of credit, a “hard inquiry” is generated on your credit report. Lenders conduct these inquiries to assess your creditworthiness and determine if you qualify for the requested credit. These inquiries can temporarily lower your credit score for approximately six months.
Consider an short-term loans from CoreLoans
If you are stuck in financial emergencies and need extra cash to pay your pending bills, consider a short-term online loan in South Africa from CoreLoans. With CoreLoans, we provide easy approval loans with instant funding within a few minutes. Additionally, enjoy flexible repayments at your comfort.