How To Improve My Credit Score In South Africa

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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.

How long does it take to improve your credit score in South Africa?

Three months is, therefore, a short period to drastically improve the credit score. If, for example, the payment history was poor over a long period, the credit score will only gradually improve over time.

What credit score is needed to buy a house in South Africa?

around 640The minimum credit score for a home loan in South Africa is around 640. A score of 600+ will give you a fair chance of home loan approval – although this may vary according to which bank you use. A score of 670+ is considered an excellent credit score, significantly boosting your chances of home loan approval.