Nur­ture your credit record and save

George Herald - Private Property - - Property News -

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

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