When it comes to health, we're here for it! And a healthy credit profile is no different. We know it's important, but why? That's where we come in! We're here to help you understand all the ins and outs of healthy credit.
Right, let's get into it…
How Does Credit Work?
Let's start at the very beginning, "credit" is borrowing money from a financial institution or applying for a credit facility with a retailer and paying it back at a certain interest rate.
So, What is a Credit Score?
Basically, it's one of the most important ways your financial health is measured. If you ever want to borrow money, your credit score gives the creditor an idea of how well you conduct your accounts. They're looking at how you pay money back and your creditworthiness. This is a buzzword for how much a lender trusts you to pay your debts. For example, a credit score can range from 0 to 800. The higher the credit score, the more credit worthy you are. If you have a low credit score, it will be harder to qualify for credit.
How Do They Work Out My Credit Score?
You have your very own credit profile. This is made up of all your past and present credit activity - things like where you have credit facilities, how you pay your accounts etc. Your credit score is based on all this info and is kept by the credit bureaus.
If your report shows that you repay your accounts well and on time, your credit score is likely to be high. If it shows that you've missed payments or even stopped paying your account, you will get a much lower score. Your score will also be affected if your profile shows that you applied for credit from a lot of different providers in a short space of time.
How Do I Check My Credit Score?
If you want to find out what your credit score is (and you should) you can contact any of the South African Credit Bureaus. Each Credit Bureau will give their own credit score, and each may use a different range.
All South African credit bureaus are required to give consumers with one free credit report within a 12-month period. All you've gotta to do is visit the website of a credit bureau and register to get your free credit report. Here are some examples of websites you can visit:
Why Should I Check My Credit Score?
By checking your credit score you can find out just how credit worthy you are. Having a healthy credit profile means you're more likely be able to borrow money when you need it (getting a cellphone contract or a credit card with your bank). One day, if you ever want to buy something big (say a car or a house) or if you need to take out a loan, the interest rate you're given is based on your credit score. The better you are at paying back, the more you'll save!
Help, My Credit Score is Low!
If you're worried about having a low credit score or if your credit score has dropped, we're here to help! Here's a few things you can do to make it better:
- Pay your accounts on time and in full every month. If things are tight and you can't pay the full instalment, then make sure you save a little extra and bring your account up to date the following month or even the month after that.
- Don't apply for credit if you can't pay the instalments, all this will do is put you into more and more debt.
- Don't make it a habit to apply for credit at lots of different places over a short space of time, this won't make you look good for credit providers!
It is also important to check your credit score regularly to make sure it's accurate and up to date. Checking your report regularly will also make sure that your details haven't been used fraudulently… yikes!
So, to sum it all up, credit is good for you! And when you look after your credit, it's even better for you! If you're looking to start building a healthy credit profile, the best place to start is with Mr Price Money. Take a look at our account options and apply today.