If you apply for mortgage finance, you
do not know if you will get approved for
the loan and what the percentage rate
will be. Both of these depend on your
credit score.
The better you credit score is, the
higher your chances of an approval at a
low rate.
Credit scores are based on the
information in an individual's credit
report. Lenders use credit scores to
evaluate the potential risk posed by
lending money to consumers
A credit score is a number that reflects
your credit risk level. The higher this
number, the better, since a high number
is an indication of lower risk.
Are all credit scores the same?
There is no single credit score. There
are many different scores used in the
financial industry for building a credit
profile. Lenders will take different
factors into account when building a
credit score, depending on their own
credit granting policies.
Often lenders will make use of data from
credit reporting agencies (bureaus) or
their own internal data to come up with
their unique credit score model.
The two major credit reporting agencies
in SA are Experian and TransUnion ITC
and they have different information on
their credit reports about you.
That means that you will have two credit
reports and two credit scores.
Improve your credit score today
A lot of credit seekers do not know how
a credit score is calculated. Here is a
few tips that you can use to improve
your credit score:
Have any incorrect information on
your credit cards removed: If
something is wrong you should get it
sorted out because it can take a few
months to get a correction.
Debt ratio: Lenders prefer a
large gap between the debt you owe and
your credit limit. This is known as your
debt ratio and can make up to 30% of
your credit file.
For example, if you
have credit limit of R10,000 on your
credit card and you owe R9,900, this
represents a very large debt ratio and
could have a negative affect on your
credit score.
By paying off credit card
balances that are close to their limit
you can improve your rating.
Number and severity of late payments:
Payment history is considered by lenders
as the most important variable. Your
payment history makes up to 35% of your
score.
Even though you can pay off your
debt, it will reflect negatively on your
credit rating if you do not always pay
your debt on time. If you want a high
score then you should make your payments
on time.
Types of debt used (installment,
revolving or credit card debt): The type
of debt you have, will be responsible
for 10% of your total credit score. If
your revolving credit makes up the most
of your credit report it will not look
good on your report.
The reason for this
is that creditors know that the monthly
minimums will vary every month depending
on how much you choose to spend.
Make arrangements: If you are
unable to make a payment due to
unforeseen circumstances, talk to your
creditor and make arrangements for
paying back what you owe.
Limit credit enquiries: Avoid any
unnecessary inquiries into your credit,
since this is responsible for 10% of
your credit report. Do not go shopping
for a car and have each and every
salesperson in town running a credit
check report on you.
Be responsible when
applying for credit since this stays on
your file for two years. If you seeking
credit then you should limit credit
checks as much as possible
Length of credit history: This
will make up 15% of your credit score.
If you have a history of credit, you
make it easier for lenders to establish
how reliable your score is.
To apply for a debt consolidation
loan you will have to fill out a short
application form. You will then receive
a FREE quote from well established,
nationally recognized lenders. You do
not need to decide now whether the debt
consolidation loan is for you.
Just apply and compare the repayments to
your current situation. There is no
obligation on your part. If you decide
that it is not for you, you simply do
not have to accept the offer. You have
nothing to lose and everything to gain.
20 Second Application
