What Makes A Good Credit Score?

Your credit score can mean the difference between being denied or approved for a home loan, personal loan or motor finance. It can also determine whether you’ll get a low or high interest rate. A good credit score will also help you qualify for a property rental agreement with a little or no deposit. It has many advantages when it comes to most financial purchases, but what makes a good credit score?

What is a Credit Score?
Your credit score is a 3 digit number generated using your credit report. It is designed to help to predict the likelihood that you will repayment the full loan.

What Makes A Good Credit Score?

What goes into a Credit Score?
Data from your credit report goes into 5 major categories that make up the elements of your credit score:

  • Payment History: (35 percent)
    Your account payment history accounts of the biggest weighting on your credit score. It has the biggest impact on your score. This means that if you hope to improve your score, you’ll need to pay all your accounts on time and in full every month.
  • Amounts Owed: (30 percent)
    How much you owe on your accounts has a second biggest impact on your credit score. The of available credit you are using on revolving accounts is heavily weighted.
  • Length Of Credit History: (15 percent)
    How long ago you opened accounts. In this case, the odder the account is the better.
  • Types Of Credit Used: (10 percent)
    The mix of accounts you have, such as revolving and installments plays a small but important role in determining your credit score.
  • New Credit: (10 percent)
    And finally if you have recently opened a number of new accounts, you credit score will have taken a hit and dropped a little.

How To Check Your Credit Score:
SA law mandates that all consumers have the right to one a free credit report annually from each credit reporting agency.

How To Get Yourself Off The Blacklist

What To Do When You’ve Been Blacklisted

Here’s a closer look at what you need to do to remove a judgement from your name.

The first step you will need to take is to find out which court has a record of the judgement against your name. You will have to apply to this court to have your name cleared.

Normally, you can find some of the required information from your credit report. You can get a free copy of your credit report (once every year) simply visit: https://mytransunion.co.za/

The next step would be to find an attorney who specialises in removing judgements. If you cannot afford an attorney you can approach one of the free legal clinics, such as
Johannesburg University Law Clinic or Stellenbosch Law Clinic

Next you will need to find out what the full outstanding balance is on the account owed to the creditor that has place the judgement against you.

Once you have the outstanding balance, you can request a lower, smaller settlement value in order to get consent for the cancellation of the judgement.

After paying up the account in full the next step is to present the consent for rescinding the judgement to the same court where it was given. This is done by way of an application for rescission of the judgement. In some courts, a simple written consent is not sufficient, and you will need an affidavit from the creditor.

Finally, you will be presented with a Rescission Court Order, which you then present to the credit bureau and the judgement will be removed.

Tips For Making Good Financial Decisions

Here are 6 excellent tips for making good financial decisions:

1) Draw up a monthly budget and stick to it.
Once your budget has been setup, keep all you receipts and track you spending on a daily basis. This will give you a better a idea of where you are spending you money.

2) Don’t get trapped into buying on credit.
Many lenders have become very good at getting you to signup for more debt, especially store cards. Don’t be fooled by the upfront offers that promise large vouchers for signing up for a new store card, these accounts only benefit the clothing companies and not you the consumer.

3) Don’t buy stuff you don’t need.
This is a very tough thing to control, since we often are not able to determine what are your wants and what are our needs.

4) Get financial education.
Up-skill yourself in the matters of personal finance.

5) Read the fine print
Always read the fine print and ask questions when you sign for any new loan agreements

6) Carefully choose which accounts to pay off first
If you are already in debt, start by paying off the accounts with the highest interest rates or the accounts with the smallest outstanding balance. Every time you pay off one account you’ll have more money available to pay off the next one.
This has a snowball effect and by doing this consistently you can be out of debt in no time.

How To Increase Your Credit Score

How To Increase Your Credit Score

Credit scores are one of the largest factors that banks will use when assessing whether or not to grant you a homeloan, vehicle finance, personal loan or any other types of finance. And knowing how to increase your credit score becomes even more important when you consider all the benefits of a good score.

Credit scores are designed to help the banks measure whether you are able to repay the loan on time and in full. The lower score represents a high risk for the banks, and this is very bad for you as a client of the bank.

If you are considering purchasing a new property in South Africa, one of the first things you need to be sure of is the accuracy of your credit report. The credit crunch and recent recession dramatically changed the home loan industry in South Africa. Banks are now more cautious about who they are willing to grant property finance to.

If you speak to a bond consultant, one of the first things they will tell you is that things change in the mortgage industry on a monthly basis. The banks are constantly changing and tweaking their leading criteria to meet the current demands.

Use these three guidelines to increase your credit score

Payment History
Late payments or short payments will cause the biggest negative impact on your credit score. If you continually pay your bills on time and in full you score will quickly begin to grow in a positive direction.

Credit Utillization
If you are currently maxed out on all your loans and credit cards, you credit score will decline fast, and you will find it very difficult to secure anymore finance in future, until you have paid off some of those debts.

Credit History
The longer you have been credit active the better it is for you credit score, as it provide proof that you have some experience in managing monthly debt repayments.

Debt Crisis Spiral

South Africans Are In A Consumer Debt Crisis

Many financial professionals believe that South Africa is in the midst of a consumer debt crisis. Short term unsecured loans are being offered to millions of people, many of whom are not able to repay their debts once interest is taken into account.

Adding to this debt crisis is the fact that there are about 19 million credit active consumers in South Africa, of which about 9 million are more than 3 month in arrears with one or more of their debts.

This spells the trouble for the South African economy. And the problems are already beginning to surface. Many would-be home buyers are simply unable to qualify for home loans because of their high debt commitments and/or poor credit records.

The reason why we’re in this situation is partly due from a stabilisation of property prices. Property prices have been relatively flat over the last few years. Also inflation has eaten away at the income of many households. Another reason is that we haven’t had the salary increases and maybe the bonuses or commissions over the last 4 years that we recieved previously.

Consumer discipline is also a problem. Most people have an attitude of wanting it all now, and are willing to take out even more debt because of this.

It is quiet common for a consumer to have over 10 or 12 active debt agreements. Its often at this point that things start to get unmanageable and they are essentially borrowing from one loan account to pay another.

According to recent research on South African consumers over a very large range of the Living Standard Measurement (LSM) are spending more money than they earn.

How To Avoid The Debt Crisis

So people have got to stop spending more than what they earn. The easiest way to do that is obviously have a balanced budget and work out what you can afford to repay and the second thing you need to do is seek help if you are in a situation where you are on the debt spiral.