Credit Score can be defined as a straightforward means of determining whether or not an individual understands how to handle their credit. This is like a financial resume that tells creditors how effectively you’ve managed your debts in the past and how well you are now.
According to Capitec, having a strong credit score will not only assist credit providers approve your application, but it will also help you receive the best prices.
A person’s credit score is established by looking at their previous and present credit behavior, which is stated in their credit report and available at credit bureaus, according to the bank.
According to Capitec, the following factors have an impact on your credit score in South Africa:
History of payments – Paying all of your bills in full and on time will demonstrate that you are dependable and prepared to repay your obligation as agreed with your creditor. Late or incomplete payments, on the other hand, can have a bad credit rating score and will appear on your credit record even if you finally pay off your credit completely.
Credit balances – Maintain a modest credit balance. The actual sum you owe is compared to the actual loan amount or credit limit by credit providers. This will show you how much you’ve previously paid off and how frequently you utilize credit especially when you have revolving credit.
Credit history length – The more information about you that is accessible, the clearer representation of your long-term credit behavior may be painted.
Additional credit – People must not open several new credit debts at once, as this may indicate that you’re having financial difficulties or maybe you’re attempting to purchase items you can’t afford.
Credit types in use – To use a number of credit products demonstrates that you can manage various sorts of credit. Because the amount and period of installment loans, such as personal loans, auto finance, and house loans, are frequently set, they assess your capacity to make regular monthly payments. Revolving credit accounts, including credit cards and shop accounts, assess how simple it is to handle your budgeting on a monthly basis, as repayments fluctuate depending on what was used in a period.
Affordability analysis
After you’ve paid your financial commitments and deducted your living expenses, credit providers must perform an affordability assessment to discover how much money you have left.
South Africans may enhance their affordability in the following ways, according to Capitec:
Monitor your income – Understand how much money you make each month, how long it lasts, and if it’s enough to cover all of your financial responsibilities and basic monthly expenditures.
Lower your spending – Take a look at your budget and see where you can save money. Paying the lowest bank fees, closing accounts, lowering non-essential spending, controlling your monthly shopping budget, paying less for transportation, or establishing a lift club are all examples of this.
