GIVE YOURSELF SOME CREDIT

How to Play the Lending Game GETTING CALLS AND MESSAGES FROM INSTITUTIONS OFFERING YOU LOANS AND CREDIT CARDS CAN MAKE YOU FEEL LIKE THE BELLE OF THE FINANCIAL BALL. “YOU WANT TO GIVE LITTLE OLD ME A CREDIT CARD WITH what LIMIT?” BEING FINANCIALLY SAVVY W

Credit and its partner in crime, debt, are two aspects of finance most people cannot live without. When it comes to buying a car, a home, or a beautiful pair of eye-wateringly expensive shoes, most of us will have to do so with credit – and, in turn, get into debt.

As we go through life paying off store clothing accounts, taking a portion of our salaries and placing them in our credit banking account, and making monthly instalments on our cellphone and gym contacts, a profile is built around our names.This is called a credit score. And, in order to be a desirable candidate for big purchases in life, such as a home loan, you’re going to want a good one.

WHAT IS A CREDIT SCORE?

Your credit score is basically a history of your spending habits. Your score takes into account your complete credit and debt history, as well as your financial capabilities. This information gives creditors – such as cellphone companies, car dealerships, credit card providers – information about your spending and repaying habits, which helps them to decide whether or not to allow you access to credit.

National Debt Advisors explains that credit providers make use of a points system when rating your credit.“A higher credit score means you are a lower risk to lenders and, therefore, you will get much better interest rates on your accounts.”

HOW DO YOU GET A GOOD SCORE?

In order to get a credit score, you have to have a history of credit. “This means that you need to have had credit of some sort at some point in your life, whether it be a store account or a loan,” explains National Debt Advisors. Having had some sort of debt – and paying it off – is important as this helps credit providers evaluate your repayment performance, and it also helps them assess your affordability.

Obtaining a good credit score involves paying off debt on time, not defaulting on payments, and not maxing out your credit cards. While it is tempting to get that extra credit card for the perks (such as free coffee every month), if you can easily shop up a storm and just swipe, swipe, swipe, multiple credit cards may not be for you.

As National Debt Advisors says: “Being trustworthy in the eyes of creditors goes a long way to securing your financial freedom and reliability.”

HOW DO YOU OVERCOME A BAD SCORE?

One of the first things to do to improve your credit score is to pay monthly instalments to your credit card to lower the amount of debt you’ve incurred on it. And the higher the instalment, the better. And, once you’ve lowered the amount of debt on your credit card, keep it that way. Clear Score, one of the leading FinTech businesses in the world, advises: “Keeping your credit card utilisation low, preferably always under 50 %, shows lenders that you can manage your credit sensibly.”

Clear Score goes on to say:“Keeping your credit card active, by spending small amounts and paying them off each month, makes you appear more attractive to lenders.This is because it shows you can reliably pay back the money you borrow.”

Check your credit report for any errors, as even a typo in your name could affect your score.

No matter where you are in the world of credit – whether you’ve got a stellar rating, or need to take the above tips into consideration – it is vital to keep your credit score in mind. The next time you whip out your credit card for those perfect shoes, keep a little alarm in the back of your mind and ask yourself:“Will I be able to pay these off in a timely manner in order to help my credit score?” If the answer is “no”, putting them back on the shelf would be the financially savvy choice.

To see your credit score, visit www.clearscore.co.za.

Keeping your credit card active, by spending small amounts and paying them off each month, makes you appear more attractive to lenders. This is because it shows you can reliably pay back the money you borrow.