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How to build a strong credit score (with simple checklist)

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A person holding a mobile phone with the screen facing towards the viewer, displaying a credit score of 752 and three buttons

Ugh, having a poor credit score sucks, doesn’t it? It makes it hard to get approved for credit, and the interest rates are a complete rip-off when you do.

Let’s change all of that.

Here are all the essential things you need to know to build a credit record worthy of a billionaire. Plus, we break it down as a handy step-by-step checklist.

 

How to build a strong credit score

Here’s a checklist that you can follow to improve your credit score:

  1. Understand the basics of credit score
  2. Check your credit report
  3. Pay bills on time
  4. Keep credit utilisation low
  5. Use credit responsibly
  6. Apply for credit sparingly

 

Plus, for those of you that are in a rush. We’ll share a couple of mistakes that everyone should avoid when building their credit record.

An individual’s credit score reflects their credit behaviour and habits. Building a strong credit score is like building muscle. It requires repetition, dedication, and habit-forming activities.

Let’s hit the credit-score-gym and go through the checklist in more detail.

 

A checlist of actionable things to do that will help build a strong credit score

 

1. Understand the basics of credit score

What is a credit score?

A credit score is a number (typically between 0 and 999 or 1200) that is assigned to every individual based on their credit history. The credit score indicates how likely someone is to repay their debts and helps financial institutions and lenders decide who to lend money to and with what terms (based on risk).

Bonus: Check out our other blog to find out what is considered a good credit score in South Africa.

 

What factors affect an individual’s credit score?
  1. Payment history — whether someone pays on time, late, or not at all.
  2. Credit utilisation — how much of the total accessible credit someone is using
  3. Length of credit history — how long the individual has had credit.
  4. Types of credit/credit mix — the sorts of credit that the user has (credit cards vs revolving credit, etc.)

 

New credit — relates to hard inquiries and new credit applications.

 

A graphic list of factors that affect someone's credit score rating

 

2. Check your credit report

Now that we understand the basics let’s find out how to check your credit report in South Africa.

How to check your credit score:

  1. With a credit bureau.
  2. Through a credit reporting agency or credit monitoring service.

 

Most people use option number two. Credit monitoring services make it easy to keep an eye on credit score ratings through apps or online portals, while credit bureaus provide more detailed reporting (usually at a cost).

My Score Hero is a free credit monitoring service that you can use to get a free credit report. Try it out.

Familiar with the basics of credit scores? Check. Know how to check your credit score? Check.

Now we can move on to how to improve your credit score.

 

3. Pay your bills on time

Paying on time is one of the most important things you can do to build a good credit history (and subsequently a strong credit score).

Missing payments or paying late, even by just a few days, can have a negative impact.

  • Paying on time is good.
  • Paying late is bad.
  • Missing payments is very bad.

 

Pay on time, and keep doing so. This is a crucial part of building and maintaining an excellent credit score.

 

4. Keep your credit utilisation low

What is credit utilisation?

Credit utilisation is the ratio between used and accessible credit or the percentage of available credit being used (same thing).

Example:

R100 000 credit limit with a current balance of R30 000 = a credit utilisation rate of 30% 

The maths: (30 000/100 000)*100 = 30

Try and keep your credit utilisation below 30% (between 20 – 30% is considered healthy).

 

Tips to keep your credit utilisation low:
  • Avoid carrying balances by paying balances in full.
  • Increase credit limits (if necessary, do so responsibly).
  • Spread credit utilisation amongst the available cards (again, be careful, and pay each balance in full each month).
  • Monitor spending and set a credit budget for yourself.

 

5. Use credit responsibly

Responsible credit use boils down to having a positive payment history and lower credit utilisation. Other indicators of responsible credit use include having a mix of credit accounts (like unsecured and secured credit) and maintaining a positive credit history for a long period of time.

Sorry. No shortcuts here.

 

A graphic that defines unsecured and secured credit side by side

 

6. Apply for credit sparingly

Each credit application triggers what is known as a hard inquiry. And, too many hard inquiries in a short period of time can be a bad signal (think, financial distress).

So, don’t apply for credit unless you need it.

 

Tips for applying for credit:
  • Only apply when necessary.
  • Do your own research first to avoid multiple applications.
  • Space out credit applications (six months in between applications is the recommended period).

 

Simple, not easy, right? Give it time. Start with the first step on the checklist and work your way through to build better financial habits that improve your credit score over time.

Now, good behaviour will only get you so far. There are a couple more pitfalls that you should avoid.

 

5 mistakes to avoid when trying to build an outstanding credit record

Here are five mistakes that could negatively impact your credit score:

  • Missing payments or paying late
  • Maxing out credit cards
  • Applying for too much credit
  • Closing old credit accounts
  • Co-signing for someone else

 

We covered missing payments, paying late, maxing out credit cards (or over-utilisation), and applying for too much credit already.

Let’s look at the other two.

Closing old credit accounts decreases the average age of your accounts, which could lower your score. Try and balance this with utilisation. Though, sometimes it is best to close an old unused account

Co-signing for someone bears some risk. If they don’t pay on time (or at all), your credit score might also get impacted.

 

What to do with uncontrollable or unaffordable debt

If monthly debt bills are too high, too many, and too much to bear, then you might need some extra help.

Debt review helps over-indebted South Africans to lower monthly debt repayments and combine multiple debts into one affordable repayment amount (amongst the other amazing benefits that debt review offers).

This might be the best place to start if you’re feeling overwhelmed. Visit our homepage at My Debt Hero to see if you qualify to reduce your monthly debt repayments.

 

Final thoughts

Let’s go over the checklist again: 

  • ✅ Understand the basics of credit score
  • ✅ Check your credit report
  • 🔁 Pay your bills on time
  • 🔁 Keep your credit utilisation low
  • 🔁 Use credit responsibly
  • 🔁 Apply for credit sparingly

 

This was an important step. Now, you need to follow the checklist and repeat the positive credit behaviours for a sustained period of time (and keep doing so). Eventually, your credit score will reach new heights, getting approved will become easy, and interest rates will stay at the minimum.

You can do it.

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