What is credit?
Credit is an arrangement that lets you buy goods now and pay for them later. To get credit, you must be able to prove that you can pay back the amount you want to borrow.
Before a company lends you money, they will check your credit history with the National Credit Regulator (NCR). If you have a bad credit record, e.g. if you skip payments or have too much debt, you may not get the credit you want.
On the other hand, if you have a good credit record, it can help you to qualify for credit today – as well as for credit in the future. It can even help you to get a better repayment rate or credit limit.
How does credit work?
A financial institution will look into your credit history as a first step to determine whether they will issue you credit or not. Your credit history can be obtained in the form of a credit report, which consists of the following information:
- The number of credit enquiries you’ve made in the past year
- The number of loans you’ve taken out or number of accounts you’ve opened
- Current outstanding balances
- Missed or late payments on your accounts
- Court judgments against you
Why do I need credit?
Establishing a good credit record is important if you plan on taking out a loan for major purchases, such as a property or a car. Some prospective employers may also use the information from your credit report to determine whether they should hire you or not. Landlords may also check your credit history before deciding to rent their property to you.