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, and lenders use your credit score as a consistent way to measure this.

South Africans are entitled to one free report per year from credit bureaus; additional reports can be obtained at a small fee. Ensure all your records are up to date and accurate before applying for large loans or additional credit.

Timely and regular repayments will increase your score, and missing any repayments has a major impact on your score. Lenders want to know how well you honour your contracts. Use budgeting to avoid overusing your credit limit once you have taken out a loan.

If you can, paying more than the minimum amount is best.

If you do fall behind, try to get back on track as soon as possible, and contact your creditors immediately to let them know.

High outstanding debt will negatively affect your score, while paying it off will improve it. Demonstrating your ability to pay regularly shows that 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 let them know.

The less credit you have, 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.

When offered a credit card or other loan, consider using less than the maximum amount given and always have a specific need in mind. This helps to avoid a situation where you have high outstanding balances, but feel like you have nothing to show for it. A person that owes a lot on credit, without regularly paying it off, may be in financial distress. Make sure you close accounts you no longer need, to avoid unnecessary charges.

If you have a specific purpose in mind, it is good practice to get quotes from multiple credit providers, but try not to do it too often. Applying for too many loans in a short space of time can be a sign that a person is under financial distress.

These loans can often be more expensive than Credit Cards or Personal Loans repaid over longer periods from bigger banks or lenders – they may become a burden on your finances because they add a lot more to your expenses in future months.