Nurture your credit record and save
A spotless credit record is almost as good as cash in the bank. At least, it is for home buyers applying for a bond, because it can help you obtain an interest rate concession that will not only lower your monthly bond repayment, but also cut thousands of rand off the total cost of your property over 20 years.
That's the word from Gerhard Kotzé, MD of the Realnet estate agency group, who says the borrower who obtains a R1-million loan now at an interest rate of 10,5% instead of 11%, for example, will pay around R300 less per month and save more than R80 000 on the total cost of their house.
"And with the national average home price now standing at almost R1,2-million, there are not many buyers who can pay cash for their property and don't need a bond - or the good credit record required to get one."
However, he notes, it can take years to build up a good credit history - or to clean up credit "mistakes" - which is why good management of monthly accounts and other debts is vital, even for young people who have no immediate plans to buy a home.
"Getting an early start on building a good credit record also means that if there are minor misjudgements early in a working career, they will most probably be outweighed by a longer period of good credit management when the time does come to apply for a bond."
Kotzé says an important first step is to open a savings or cheque account in your own name, keep it balanced and stay within your credit limits. "A history of no defaults on a major purchase like a car will also be a great recommendation, as will a record of always paying your rent on time. Then when it comes to accounts for things like store cards, your cellphone and city council services, you also need to pay attention to the 'due-by date' for each instalment and try to pay before that.
For credit reporting purposes, you need to pay on time as well as in full to avoid black marks, and accounts are usually regarded as overdue if the minimum amount stated has not been paid within 30 days."
Another useful rule for good credit management, he says, is to try to keep the total value of your monthly credit repayments or instalments (excluding rent or bond repayments) to 30% or less of your monthly nett income.
"Currently, according to the latest statistics from Payprop, the average debt-to-income ratio in SA is 40%, which is why so many families are struggling to make ends meet and why so many prospective home buyers are finding it difficult to save up a deposit."
*Consumers who are starting to plan a home purchase and want to assess their own credit record and find out their credit score should visit https://www.clearscore.co.za.