How to improve your credit rating

29 January 2013

It’s important to ensure that you have a good credit score (often referred to as a credit rating) as this will influence whether you can take out a home or car loan. There are several things you can do ensure that your credit rating remains healthy, finds Angelique Ruzicka.

Have you been declined for a car or home loan lately? This could be a tell-tale sign that your credit record may not be as healthy as you need it to be. This is where you need to do some detective work to find out why you’ve been rejected. But don’t worry, help is at hand. We’ve compiled a list of the most common questions you may have regarding your credit score and provided answers for all of them:

I’ve been rejected for a loan, what do I do now?
It’s very confusing, but every credit provider uses a different method to decide on whether or not to grant you a loan. However, they do rely heavily on the information they obtain from the credit bureau. The best way to tackle the problem is to consult a credit bureau such as Experian orTransUnion and ask for your credit report. It contains information about who you are, where you live, how much debt you have and how many times you have applied for credit. It can also reveal if you are in arrears and whether there are any judgements against you.

Credit bureaus keep track of your payment record on a monthly basis. By law, you are entitled to one free credit report per year. If you want another report within the same year, you need to pay an administration fee of approximately R20.

I’ve never applied for credit before so I don’t have a credit record. So why are they rejecting me?
One would think that if you don’t have multiple store and credit cards that you’d be an ideal candidate for a loan. But unfortunately to get credit you have to have a record showing you can be responsible with it. If you don’t have a credit record you have to create one. The trick is to open up a store card, put a small amount of money on it and pay it off on time. In about six months you will have built up a positive credit record.

I’ve paid all my bills now. Can they change my credit record?
Unfortunately you can’t make them change your history if you’ve been a bad payer. But you can call the credit bureau to inform them that all your debts have been paid and that this should be reflected on your records. If you manage your debt wisely from then on, chances are your credit rating will become healthy again. Take a look at our Debt Guide for tips on managing your debt.

I know I pay my bills on time. I think the credit bureau has got it wrong, what can I do?
Don’t let this intimidate you. Information can be captured incorrectly sometimes. The good news is you can dispute this. Contact the credit provider and credit bureau concerned, preferably in writing, and ask that the information be updated or removed. Sorting out disputes generally takes around 20 working days. If you are unhappy with the outcome and believe you are in the right, contact the Credit Ombud. They will conduct an investigation free of charge on your behalf. Be sure to get a reference number from the credit bureau. The Credit Ombud will not investigate the matter if there’s no proof that you haven’t tried to resolve the issue yourself.

Some of the credit activity recorded does not appear to be mine – what can I do? 
You may have become a victim of identity theft. This is another important reason to check your credit record regularly. If someone steals your personal information they could take out a loan in your name and this will show up on your credit record.
If you suspect you are a victim of ID theft, you need to first ask the credit provider concerned to investigate the matter. If they can’t resolve it then you need to lodge a complaint with a credit bureau, which will also investigate the incident. Again, if the credit provider or credit bureau can’t resolve the issue you need to contact the Credit Ombud.

Is there anything further I can do to improve my credit rating?
You can’t repair past mistakes but you can improve your credit rating by dealing with your credit responsibly going forward. Here are a few tips:

1. Never make late payments or fail to pay your loan – this can adversely affect your credit record.

If you have trouble remembering to make payments, set up debit orders to pay off your loans. Ensure that they reach the provider’s account by the due date – some debit orders can take a few working days to clear.

2. Don’t max out your credit cards to the point where you can’t afford the repayments. Keep balances low, pay them off in full or at the very least, make your minimum payments on time. Take a look at our guide on how to use your credit card wisely for tips on keeping your spending to a minimum.

3. If you have too many credit accounts then lenders may consider you a greater risk. Close any credit or store cards that you don’t make use of. But don’t close them all – remember you need to show lenders that you can  manage debt responsibly.

4.  Don’t make too many enquiries about opening credit accounts. Every time you ask to open an account and get accepted or rejected it gets recorded. Creditors will again perceive this as a risk, especially if you mismanage these accounts.

5.  Make sure you tell your creditors and credit bureaus of your change of address. Often people get into debt after not telling their provider they have moved and forget to pay the bills as they never get them.

6. Don’t let it get to a stage where your creditors take you to court. Court judgements can sit on your credit record for five years and that could prevent you from purchasing that dream home.

6. If you are getting a swathe of threatening letters from your lenders and can’t afford the minimum repayments, then you need to seek help now. There are services available to assist you.

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