Five Steps to improve your credit score

Before approving your request to borrow money, lenders need to make sure that you’re in good financial shape. They want to know how well you manage your money and how quickly you’ll be able to repay your debt.

Your credit score is a good reflection of your credit health. The good news is, your credit score isn’t fixed, and if you do find your score a bit low, you can always improve it:

1. Stay on top of financial commitments

Timely payments will increase your score. Creditors want to know how well you honour your contracts (any late or missed payments will reflect poorly). If you do fall behind on repayments, try to get back on track ASAP.

2. Pay your debts

High outstanding debt will negatively affect your score while paying it off will improve it. Demonstrating regular debt repayments shows you’re capable of managing your finances. And while you only need to pay the minimum instalments, paying a little more every month is best.

If you’re unable to make a repayment, contact your creditors immediately to inform them.

3. Lose what you don’t use

The less credit against your name, the lower your risk. Close all accounts you’re not using. Creditors assess the full facility of your credit agreements, even if they’re not being used.

4. Keep your credit limits high and what you owe low

Instead of asking creditors to lower your credit limits, try to minimise the gap between your amount due and your credit limit. This is a positive in the creditors’ eyes.

5. Know your rating

South Africans are entitled to one free report per year from credit bureaus, additional reports can be obtained at a small fee. TransUnion offers a free annual credit rating report. Ensure all your record information is up to date and accurate before applying for large loans or additional credit.