MANAGING YOUR CREDIT
2001, we’ve seen a huge increase in the desire for “bad” credit.
credit that feeds consumerism and the need for immediate
Methods used in curbing this indulgence have had an adverse effect on
availability of “good” credit (credit used to build
wanting to take advantage of the current market opportunities, post recession, are
difficult to qualify for credit, as credit providers are being
selective as to
how they part with their limited funds available. So how do you
that you are first in line when it comes to credit extension?
limits granted, whether used or not, are taken into account when
your affordability. Hence if you have an overdraft facility that
not utilizing or a credit card limit of R60 000, where you only need
reduce this accordingly.
Have Some Form of Credit Facility
It is very
difficult for banks to assess your credit management if you don’t
an existing credit facility. Having no credit facilities
reduce your credit scoring. Obtain credit, use it wisely and build a credit record.
Pay Your Accounts on Time, Every Time
account is due on the 30th of the month, but you are in the habit of
paying 10 days later, you will be listed as a bad payer. If one
pay a double instalment and the next month you don’t pay your account,
be listed. Always pay an instalment on your account, on time, to
being listed as a bad payer and possibly even having your credit
Avoid Bounced Cheques / Debit Orders
cheques or debit orders are returned due to insufficient funds, your
scoring at that particular bank will be adversely affected, even if you
out the problem the very next day.
applying for credit at another financial institution, they will request
3 to 6
months bank statements and possibly even a “code” from your
banker. If at
the time your unpaid items are still evident, the bank may refuse to
Check your Credit Record
the various credit bureaus and make sure that you have not been
listed. You are entitled to a free report once a year.
dispute any adverse record you don’t agree with or sort out any
listing. This information is available to all banks and they will
grant any form of credit extension if you currently have unresolved
ITC- Call Centre: 0861 482 482
Experian S.A. - Call
Centre: 0861 105 665
Decisions Systems (XDS) - Telephone: 011 645 9100
Information Technologies -Call Centre: 0861 514 131
are problems, call the Credit Information Ombudsman at their call
0861 662 837
suspect that you will be entering difficult times in future, make plans
release equity on your assets, obtain additional finance and reduce
expenditure. Make hay while the sun shines, because once you are
trouble, it will be very difficult to convince anybody that you are
using a Financial Coach to help you prepare a budget and assist you in
out a plan for your finances.
Have Updated Financials
very surprised at how many self-employed entrepreneurs don’t have
financial statements and management accounts. How do you manage
business? Without management accounts, you are sending out a
message that you are not on top of the financial aspects of your
business. How do you propose convincing anybody that your
continue sustaining itself and provide you with future income?
statements and management accounts are the foundation for successful
management. They reflect the history of your business, your
expenditure and the flow of funds, and without them it is almost
assess your credit worthiness.
Avoid Trading in Cash
If you run
a cash business, deposit your cash into your bank account. Even
have accurate financials, but the bank is unable to verify your
through your bank account, they may refuse to grant you credit.
always argue that you are avoiding depositing cash to reduce the bank
on cash deposits, but then the bank will require your latest tax
on a Preprepared Budget
easier said that done but very easy once done. People who have fallen
habit of preparing a budget and sticking to it will testify as to how
liberated them financially and actually provided them with more
due to reducing unnecessary expenditure and random spending.
you apply for a loan or provide your Social Security number for credit,
likely your credit report may be pulled. This is called a Credit
large number of inquiries appearing on your credit profile over a short
of time may be interpreted either as a sign that you are opening credit
accounts due to financial difficulties or overextending yourself by
more debt than you can easily repay. Apply for new credit in
credit coach will help you identify where inquires are on your report
to best manage them.
always eager to blame circumstances and the current market conditions
position we find ourselves in. Without sounding insensitive, 80%
declines are due to applicants not taking responsibility for their
worthiness. In the past, credit was easily available,
the detriment of a healthy fiscal environment. Credit is still
but it is up to you to prove credibility.
SOME FINAL TIPS
the Temptation of Offers
to establish a reasonably good financial foundation before a lender
approve you for a mortgage loan. Lenders look for a good credit rating,
sufficient funds to make the initial down payment and pay the closing
and a stable employment situation.
have just qualified for a mortgage loan are usually in
financial shape. If you have recently purchased a new house, don't be
if you receive numerous offers from retail stores and other credit card
companies offering you pre-approved revolving credit.
about accepting these offers! New home owners often use most of their
in the process of financing the transaction, and they need everything
linens to furniture to get settled in the home. With all of the
credit available, it may be very tempting to just say "charge it." If
you're not careful, you could be "up to your ears" in debt very
quickly. It takes discipline to reach the goal of home ownership--and
that same kind of discipline to maintain financial health after you
for new credit with wisdom
apply every time you see an offer. Getting too much credit too quickly
your credit profile. Remember to print clearly when applying for
your application information is entered inaccurately it can create
of reported information on your credit report. Consistently use your
name without any variations. Providing complete, accurate and
identification on your credit applications helps set up your credit
correctly from the beginning. It also minimizes the chance that your
file will be incomplete or mixed with another consumer's file.
old accounts is good - Many people believe closing old and inactive
an effective means of managing their credit. But they should think
closing their older and more established accounts on their credit
old credit accounts can significantly lower a credit rating by making
credit history appear shorter. You should consider storing or cutting
credit card you don’t intend to use instead of having it cancelled or
- Paying off a negative record will remove it from your
credit report - Negative
records such as collection accounts, bankruptcies and late payments
on your credit report for 5 to 10 years depending on current
Paying off the account before the end of the term doesn't remove it
credit report but it will cause the account to be marked as "paid."
It’s still a good idea to pay your debts in full. Just be aware the
positive impact in your report and profile will be achieved when the
records expire. Once paid up you need to get a paid up letter from the supplier and then have this removed from your records
- Co-signing for an account doesn’t make you fully
responsible for it - When you open a
joint account or co-sign on a loan, credit card or other credit
are taking on full
legal responsibility. Your credit and capability to acquire
new credit will be affected. If the party you co-signed for does not
bill it will have the same impact as if you didn’t pay. Any activity on
shared accounts, good or bad, will show up on both parties’ credit
you co-sign for a friend's auto loan and they don't make the payments,
credit profile will be equally hurt by their actions or lack-thereof.
way to stop this double reporting and negative impact is to pay the
loan off or
refinance the debt without you as a co-signer. In general, you should
twice before you co-sign for anyone. If you do decide to co-sign,
keeping it restricted to responsible family members.
- Paying off a bill will add points to your credit rating –
Your credit rating is
achieved by considering a variety of factors. These “formulas” often
based on the economy and the bank’s current view to credit risk. It is
hard to predict how many “points” you can gain by changing one factor.
keep paying your bills on time, reducing your overall debt and removing
inaccuracies from your credit report. Good financial behaviour over
what you are looking for to build a good credit rating.
- Once I have paid up my debts under debt review I can get credit.
Paying up at your Debt Administrator is only the first step. Then you
have to check with the suppliers themselves what balances they are
reflecting. Most times they will still have additional amounts
reflecting. You must then settle these and obtain paid up letters. Then
you have to have the advers ereports removed from your records. Then
you have to embark on a 6 month strict financial diet proving you are
indeed credit worthy again. Then and only then will you be successful
in obtaining property financing.
Back the Finance Advice Centre for
all your finance answers
Self Employed persons and property finance
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