Ways to improve credit score

There are various ways to improve your credit score. There is no quick fix to improve your credit score overnight.

Today there are many scamsters out there, they will promise to instantly fix your credit report, be wary of such promises. These scamsters are just out to make a quick buck. Getting your credit score back on track may take a few months.

 

Lets first look at how your credit score is compiled.

Your credit score is made of various factors listed below:

  1. Payments – This is one of the biggest contributing factor to your credit score. Paying your accounts on time will affect your credit score. Non-payment or late payment will lower your credit score.
  2. Enquiries – depending on the number of enquiries done on your profile this can also lower your credit score if there are excessive checks.
  3. Judgements – This can drastically lower your credit score.
  4. Defaults – This can drastically lower your credit score. This also includes all other collection records.
  5. Higher exposure – higher debt exposure will also lower your credit score, especially if your debt exposure is more than your disposable income.

 

Now let’s look at why a credit score is important to a credit provider.

A healthy credit report is vital to secure credit especially when applying for a home loan. Credit providers will always pull out your credit report before granting credit. Your credit provider will look at your score and all factors listed above before granting your credit. The main reason for this is to ensure that you can pay the debt back as well as a trust factor. Credit providers are required to pull out your credit report to ensure responsible lending. Credit providers also work on risk, if you are a high-risk client then your application will most likely be declined.

Understanding your credit score

EXCELLENT 767-900

GOOD 681-766

FAVOURABLE 614-680

AVERAGE 583-613

BELOW AVERAGE 527-582

UNFAVOURABLE 487-526

POOR 0-486

 

Here are important tips to improve your credit score:

  1. Limit enquiries – Too many enquiries will lower your credit score. Always read the fine print when submitting your application. Some websites offer comparison services and multiple provider can conduct an enquiry on your credit profile.
  2. Account history – Ensure you pay your accounts on time and the full instalment has been paid.
  3. Check your credit report regularly – Check your credit report to ensure that everything is in order and no fraud has taken place under your profile. Check to see if credit providers are updating your accounts. Should you find inaccurate information, you can lodge a dispute with the credit bureau.
  4. Limit debt exposure – Do you over commit to credit agreements. When using credit facilities do not use the max credit facility granted. Always maintain a 35% balance on each credit agreement.
  5. Judgements/Defaults – Always make payments on time to avoid credit providers listing defaults or obtaining judgements. The type of negative records can drastically bring down your credit score.
  6. Settle debt- It is always advisable to pay off debt rather than borrow more money to pay off debt.
  7. New credit- When there are excessive credit agreements for a specific period, credit bureaus generally will lower your credit score. Simultaneous applications indicate a change in your financial situation.

 

Should you need further help with your credit score email info@smartdebtadvisors.co.za or call 086 006 1008