“If you don’t take good care of your credit, then your credit won’t take good care of you.” ― Tyler Gregory
There are several rumours around whether or not credit scores are even important – and many differing views on how to improve yours. We’re here to put these rumours at rest – and explain exactly how having a good credit score in South Africa can positively impact you.
Unlike age, your credit score is not “just a number” and it’s vital to understand how it can help you in your personal and professional life.
Your credit score represents, by way of one number, the strengths and weaknesses of information in your credit report. It is calculated using algorithms that evaluate how poorly or how well a person pays their bills, how much debt they carry and how their credit records compare to other borrowers.
In essence, it is a single number that tells a story about a person and how they manage their money
1. Increase your chances of credit card or loan approval
Although having a great credit score does not guarantee approval, as lenders consider other factors such as debt and income, it is still a major factor when making lending decisions.
Having a good credit score gives you confidence when applying for a loan or a credit card as it increases your chances of being approved.
Borrowers with a poor credit history aren’t as lucky. They will typically avoid applying for a new loan or credit card because they have previously been turned down, resulting in a downward spiral that becomes increasingly difficult to get out of.
2. Receive lower interest rates on credit cards and loans
The interest rate, the cost you pay for borrowing money, is often directly tied to your credit score. The better your score, the more likely you are to get better interest rates and end up paying lower finance charges on credit card balances and loans. This means you’ll have less interest, allowing you to pay off your debt more quickly, and have more money for your other expenses.
3. Get approval for higher limits
A person’s capacity to borrow is based on their credit score and income.
Banks are willing to let you borrow more money if you have a good credit score because this means that you have a proven in the past that you pay back what you have previously borrowed on time.
If you are approved for the occasional loan with a bad credit score, the amount will be limited.
4. Get a cell phone contract more easily
Having a bad credit score means cell phone service providers may not let you take out a cell phone contract forcing you to take out a phone on a pay-as-you-go plan which, in many cases, can be more expensive.
Having a good credit score could mean a discounted purchase price on the latest devices by signing a contract and also avoiding a security deposit when purchasing a phone.
5. Easier approval on a rental home or apartment
Today, more and more landlords are looking at credit scores when screening tenants.
A clean credit score will save you time and stress when looking for a place to rent.
Whereas a bad credit score can seriously hinder your chances of getting into an apartment, particularly if it was caused by an outstanding rental balance or previous evictions.
6. Lower car insurance rates
According to several insurance companies, people with bad credit tend to file more claims and these people are penalised with a higher insurance premium, whereas those with a good credit score are rewarded with lower insurance premiums.
Those with good credit records end up paying less for insurance than similar applicants with lower credit scores.
7. Overall more negotiating power
Not only will you be able to get the best interest rates and save more of your money, but having a good credit track record to your name also gives you better negotiating power. You can leverage your impressive credit score to negotiate lower interest rates on credit cards and loans, or take advantage of the other attractive offers you’ve received from other companies based on your credit.
Because of all the aforementioned benefits, having a good credit score is certainly something to feel proud of, especially if you have had a bad credit score in the past and have had to work hard to improve it.
The bottom line is: It is important to be aware of what credit score you have because of how it can tremendously affect your life.
How to Pull Your Credit Score in South Africa
Several local credit bureaus allow all South African citizens to pull a free credit report per year – one such company is TransUnion, who enable you to access your full credit report to understand how lenders see you.
Here at Fundrr, we can strongly recommend that everyone do this, to see where they stand and where they can improve.
Credit: Good or Bad?
Essentially, credit means being able to spend money you don’t have now that you are borrowing from yourself at a later stage. Which means later, you are going to have to spend less than you are earning to pay back the loan.
This is why credit can be good or bad.
If you are borrowing and over-extending yourself to buy something that is not going to help you make more money at a later stage, we see credit as a bad thing. But if you are using credit to buy something to expand your business – that will result in more wealth in the future – then credit is, of course, beneficial and constructive.
This is because the use of credit now is going to make you more money in the future in surplus of the interest payments that you will have to make over the given period.
Therefore, here at Fundrr, we only provide business loans and not personal loans.
We believe that small businesses in South Africa are the key to generating revenue that boost the South Africa economy and business sector. We also understand that sometimes times are tough, and cash flow is strained, and so we provide small-business loans to the companies that need it – the companies that will use their credit to create more revenue-driving activities that, in turn, help the South African economy to flourish.
To find out if you qualify for a loan, get in touch with us here.