How To Increase Your Credit Score
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How To Increase Your Credit Score
In the journey towards financial stability, your credit score plays a pivotal role. A good credit score opens doors to better loan terms, lower interest rates, and improved financial opportunities. If you are looking to increase your credit score, here's a comprehensive guide to help you navigate the path to a better credit score.
What influences your credit score?
Firstly, it's essential to understand what contributes to your credit score. The four main credit bureaus in South Africa are, Experian, TransUnion, Compuscan, and XDS. Equifax evaluate your financial behaviour. Factors such as payment history, credit utilisation, length of credit history, types of credit in use, and new credit accounts all influence your credit score.
Steps to Improve Your Credit Score:
- Check Your Credit Report Regularly:
Obtain a copy of your credit report from the major credit bureaus. Review it for any inaccuracies, discrepancies, or unauthorised accounts. Reporting and rectifying errors promptly can positively impact your score.
- Pay Your Bills on Time:
Timely payment of bills is one of the most critical factors in determining your credit score. Set up reminders or schedule payments to ensure you never miss a payment date.
- Reduce Outstanding Debt:
High levels of debt relative to your credit limit can negatively affect your score. Develop a plan to reduce outstanding balances, focusing on high-interest debts first. You can also opt for the option where you pay more than what your repayment is monthly.
- Diversify Your Credit Mix:
Having a mix of credit types, such as credit cards, loans, and retail accounts, can positively influence your credit score. However, be cautious not to open too many new accounts at once, as it may be seen as a red flag.
- Increase Credit Limits:
If possible, consider requesting a credit limit increase. This can help improve your credit utilisation ratio, a key factor in your credit score calculation.
- Negotiate with Creditors:
If you're facing financial difficulties, consider negotiating with your creditors. They may be willing to work out a revised payment plan or settle for a reduced amount.
Before house hunting, it's advisable to get pre-approved for a loan first. This involves a thorough examination of your credit history. A higher credit score can make the pre-approval process smoother and strengthen your position as a serious buyer. It may also enable you to qualify for a larger loan amount.
To ensure a smooth house-buying journey, it's crucial to regularly check and maintain a healthy credit score.
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Author: Megan Hurter