Published on June 24th, 2019 | by admin0
The Importance of Knowing Your Credit Score.
You may be surprised to learn that knowing your credit score is a crucial part of financial management for anyone in South Africa. Credit is something that we come to in an emergency. We don’t plan to use credit services like credit cards, Wonga, or overdrafts, but if you suddenly need to buy expensive household goods, a car or an emergency repair, it is to credit that we have to turn. Unfortunately, for many people, it is at this point that they find out that their low credit score means they are unable to get the credit that they need. How to avoid? Here’s a quick guide to how to find out your credit score and why it is important to do so.
Credit scoring is important because with the twists and turns that life involves, you never know when you might need it. Without the right credit score, you will not be able to get credit in an emergency when you desperately require it. For more information on the negative affects a low credit score can have check the guide here. As we all know, it is always advantageous to be fully prepared for any eventuality. Knowing your credit score ensures that you are ready for whatever financial situation may come your way.
How your credit score is calculated
Depending on your financial decisions, your credit score may go up or down, so it is helpful to know the factors that affect your credit score. Three things can adversely affect your credit score, not having any credit at all, not paying your bills on time and being refused credit. Your credit score is an analysis of your past patterns of borrowing and payments. The view is that if you have not paid your bills on time in the past, you are unlikely to do so now. Similarly, if you have never taken out credit, then your behaviour is hard to predict.
How to improve your credit score
Credit scores can be improved. If you have never taken out credit, you can improve your score by getting a credit card with a low balance to create a credit history – make sure that you pay it on time though! Similarly, if you have a poor credit history, in addition to paying bills on time, take out a credit-builder credit card with a really low balance and show that you can make payments on time, by keeping up with the repayment schedule. According to The National Credit Act, any South African citizen has a right to obtain one free credit report each year. Find out your credit score at Experian, Equifax or TransUnion.
Armed with all of this essential information, you can make sure that when you do need credit, you have the right credit score to obtain it.
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