What is Good Credit ?
For a score with a range between 300 and 850, a credit score of 700 or above is generally considered good. A score of 800 or above on the same range is considered to be excellent. Most consumers have credit scores that fall between 600 and 750.
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.
What is a good credit score?
A credit score of 600+ is considered passable, and is probably high enough to get your home loan application approved, depending on the lending criteria of the bank.
A credit score of 800+ is excellent, and home buyers will want to do whatever they can to achieve such a score.
How do I calculate my credit score?
You can use ooba Home Loans’ Bond Indicator, a free, online tool, to determine your credit score.
How to improve your credit score quickly
If you’re worried your credit score might not be high enough, or you’ve already had an application rejected, fear not, as there are ways to improve your credit score.
Some of these methods will only take effect in the long-term (in most cases, it will take six months on average to see improvement in your credit score); while others can provide an immediate boost. The following suggestions include methods that may even improve your credit score within 30 days.
1. Check credit reports for errors
One measure you can take immediately is to check your credit report for errors and inconsistencies. Your credit record is calculated by credit bureaus, using your payment and account history, but the report could be subject to mistakes.
Contest some of the black marks on your credit record, such as late payments that weren’t late, and you may be able to earn yourself a few extra points.
2. Pay off outstanding debts
Outstanding debts have a significant impact on your credit record, so pay off as much and as many as you can. Start with credit card accounts as they usually have the highest interest rates.
3. Reduce your credit ratio
The gap between the amount you owe and the limit to your credit affects your credit record. This is known as your credit utilization ratio. For example, if your available credit is R20 000 and you owe R10 000, your credit utilization ratio is 50%.
A good rule of thumb is to keep your credit utilization ratio at 30% or lower. So in the above example, paying down what you owe in order to reduce the 50% rate to 30% will boost your credit score. Paying your account before the due date also increases your score.
The credit utilization ratio is one of the primary factors in determining your credit score, along with payment history.
4. Settle and close accounts
Closing accounts after you’ve settled them will reduce the number of credit accounts attached to your name. Having too many accounts open will negatively impact your credit score, as it signifies a high amount of borrowing.
5. Avoid using credit
Naturally, you should show restraint when using available credit while you take the necessary steps to improve your credit record. Avoid taking on new debt and opening new accounts.
6. Ensure your spouse takes the same measures
The credit record of your spouse will also be taken into account if you apply for a joint home loan, or are married in community of property. So if your spouse takes the same steps listed above to improve their own credit record, you improve your chances of home loan approval.
Buy a home with renewed confidence
Once you’ve taken the necessary steps and seen an improvement in your credit score, it’s time to apply for a home loan with improved confidence. ooba Home Loans can apply to multiple banks on your behalf, giving you the best chance of home loan approval, as some banks may have stricter lending criteria than others.
They also offer a range of tools that can make the home-buying process easier. Start with their Bond Calculator, then use the ooba Home Loans Bond Indicator to determine what you can afford. When you’re ready, you can apply for a home loan.