Five effective ways to boost your credit score
Category News
A good credit score holds immense significance when it comes to purchasing property in South Africa. It serves as a key determinant in the approval process for home loans and influences the terms and interest rates offered by lenders.
"With a higher credit score, prospective homebuyers gain a competitive edge in the real estate market, enabling them to access larger loan amounts and secure more favourable bond terms. Ultimately, a strong credit score opens doors to a wider range of property options and enhances the overall affordability and feasibility of homeownership in South Africa," says Berry Everitt, CEO of the Chas Everitt International property group.
And fortunately, you can quite easily improve your credit score and increase your chances of being approved for a home loan by following these five practical strategies:
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Understand your credit report and score: To embark on the journey of credit improvement, start by familiarising yourself with your credit report and score. Websites like ClearScore.com provide free access to your credit report, which includes information about your credit history, accounts and payment patterns. By understanding this information, you can identify any errors or discrepancies that might be negatively affecting your score. Monitoring your credit score regularly is essential for maintaining a healthy financial profile.
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Make timely payments: Consistently paying your accounts on time is a crucial factor in improving your credit score. Late or missed payments can have a significant negative impact on your creditworthiness. To establish a positive payment history, set up automatic payments or reminders for all your credit obligations, including loans, credit cards and utility bills.
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Reduce your credit utilisation: Your credit utilisation ratio, which is the percentage of available credit you are using, also plays a significant role in determining your credit score. To improve this ratio, aim to keep your credit card balances low and pay them off in full each month. By managing your credit utilisation effectively, you demonstrate financial discipline and reliability, positively influencing your creditworthiness.
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Minimise new credit applications: Frequent applications for new credit can negatively impact your credit score, as lenders may perceive you as financially unstable or desperate for credit. Each application typically triggers a "hard inquiry" on your credit report, which can temporarily lower your score. Be selective when applying for new credit and only do so when necessary.
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Diversify your credit mix and maintain older accounts: Having a diverse range of credit accounts can positively influence your credit score. Lenders appreciate seeing a responsible mix of credit cards, loans and other credit lines. However, it's important to use credit responsibly and avoid taking on excessive debt. Additionally, keeping older credit accounts open, even if they are rarely used, can demonstrate a longer credit history, which can positively impact your credit score.
By taking proactive measures to improve your credit score, you'll be one step closer to turning your homeownership dreams into a reality. For more expert advice on getting approved for a home loan click here.
Author: Chas Everitt