South African credit scores are based on an algorithm
Your credit score is a number between approximately 300 and 999, which is used to measure how likely you are to pay your accounts and whether you are creditworthy. It is generated by means of a mathematical algorithm that takes the information on your credit report and compares it to the information of millions of your countrymen. Your credit report, in turn, is based on your payment history, amount of money owed, the age of your accounts, judgements and defaults, as well as enquiries regarding your account.
TOP TIP: Would you like to know your credit rating? Visit the TransUnion website for a free report and breakdown of how your credit score was calculated.
It’s better to pay off debt than to move it around
If you want to improve your credit score, it's best to pay off your revolving credit slowly but surely. Owing the same amount on fewer open accounts could actually count against you.
New credit user? Don’t open a bunch of accounts at once!
If you are new to managing credit (e.g. a student accessing a line of credit for the first time after varsity), don't go out and open a bunch of accounts a clothing stores, homeware businesses, etc. all at once. It will lower your average account age, and can look pretty risky if you're a new credit user.
It’s better to have properly managed credit than none at all
As a rule of thumb, it is better for your credit score to have credit cards and instalment loans that are paid off conscientiously, than having none at all. It leaves a paper trail of responsible repayment.
Ask for help when you’re in over your head
These days there is a lot of pressure to keep up appearances. If you get to a point where you realise that you are unable to take care of your existing debt repayments, get professional debt management help immediately. Getting into more debt to keep the boat afloat is never the answer.
For more information on how to improve your South African credit rating or to learn more about debt management and how it can help you to manage debt repayments, don’t hesitate to get in touch with a Libertine Consultants representative.