Building a good credit history
Category News
Nobody likes the C-word: Credit. But if you're aspiring to buy a property in the future, a good-looking credit record will improve your chances of bond approval.
But how do you build a good credit history? Gerhard van der Linde from Seeff Pretoria East weighs in:
From a property perspective it is extremely important for modern day consumers to keep a spotless credit background if they want to be able to enter lease agreements and to obtain a bond in order to purchase property.
According to the NDA website (National Debt Advisors) your credit history helps credit providers judge your repayment behaviour and it also helps them to assess your affordability.
First and foremost you will need a credit history, be it in a form of a store account or a loan. If you have no credit history there is no way for a creditor to determine your affordability.
If you have not built up a credit history it is a good idea to open a store account and to make sure that all your repayments are always on time – by doing this you will build a good credit reputation.
If you decide to get a credit card, ensure that your limit is set low and that you always make repayments on time, trying to repay more than the required amount to boost your credit score.
More tips to keep in mind include:
- Find out your credit status. You are entitled to one free credit check a year. The result will help you determine if you need to take action to repair your credit score. If you have a healthy score you will have peace of mind to go ahead.
- Draw up a budget and stick to it. If you deplete your credit card every month it will become increasingly difficult to make the monthly repayments. That is why it is really important to only buy what you can afford. It is a good idea to purchase with your credit card in order to build up your credit history, but equally important is to manage this and to make repayments before interest kicks in.
- Get into the habit of saving as early as possible. When it comes to buying a house and you have managed to save for a deposit it does not only demonstrate your discipline, but will also assist in obtaining a better interest rate when applying for a bond.
- Strive for stability. In today’s economic climate in South Africa fewer employment opportunities and retrenchments are a sad reality, but it is best for your background to have stable employment. Changing jobs frequently impacts on your ability to meet monthly repayments and then it affects your credit score. Creditors prefer to lend to people who have stable incomes. In all circumstances do your best in order to ensure that your credit repayments don’t fall behind.
Author: Seeff
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