Our credit score is one of those things in life that is misunderstood. At most, the average person may understand that their credit score affects their access to credit in some way or the other, but they are far less likely to actually know what their score is, how it’s calculated, how to check their scores, and how to improve their scores. 

Let AA Inform help with all the information and tips you need so that you’re up to speed on this rather important part of your life as an independent person who has aspirations of buying a car, applying for financial assistance, and even purchasing your own home.

In this post, we’ll explain what a credit score is and how you can improve your score quickly.

What a credit score is

Your credit score is a summary number that represents your creditworthiness. Before we go any further, ‘creditworthiness’ simply means a lender’s willingness to trust you to repay your debts. It’s basically how trustworthy you are viewed by those who could sell you something or lend you money.

The number itself is largely based on a debt report, using information provided by credit bureaus. Most credit bureaus rate your credit score between 300 and 850. Your credit score can be affected by several factors, including your credit files, history, usage, and repayments.

To give you an idea, a low score is allocated to those with a credit score of 490 and less. These people are considered high-risk and don’t qualify for loans, while those with a score of 580-669 are thought to have a ‘fair score’ and usually get access to loans at good interest rates. A good score is anything over 700, which is the category for low-risk borrowers who, as a result, get extremely easy access to loans and lower fees than anyone else.

As you can see, the higher your score is, the healthier your credit is and the more likely you’ll be approved for a credit application.

10 Ways to improve your credit score

The reality is that your credit score plays a significant role in whether or not you can get access to credit – like getting home loan approval for your dream home.

1. Get current. Find out what your current credit score is by visiting a credit bureau website.
2. Get up to date. By checking your credit report you can look out for errors and dispute any inaccuracies.
3. Pay off outstanding debts. There are a number of strategies you can use to pay off your debts, and bringing your debt down can drastically improve your rating.
4. Reduce your credit ratio. You’re aiming to keep your balance at 30% of your limit. For example, if you have a R20 000 credit card limit, then you’ll want to keep your balance to not more than R6 000.
5. Settle and close. We’re talking about your accounts, especially those that you aren’t actively using.
6. Be consistent. Once you’ve got a repayment plan, make sure that you pay the full installments that you’ve decided on.
7. Don’t apply for credit too often. Your credit report shows how many applications you make, so if you shop around and put in too many applications, it could look like you’re struggling to manage your debt.
8. Seek debt counselling. If you’re feeling overwhelmed and need help with a budget and assistance with making arrangements with your creditors on your behalf, seek help.
9. Avoid unsecured debt. Secure loans like home and vehicle finance are viewed more favourably than personal loans, which are unsecure. Not that personal loans are bad, but taking out too many isn’t good for your rating.
10. End the negativity. Remedy any negative listings and settle any outstanding amounts so that you can get any defaults or judgements against you removed.

Feeling informed?

We hope that this information helps, because improving your credit score can really affect your life for the better. It just makes sense that you would want to make yourself an attractive candidate to future lenders so that you can do things, like apply for a home loan or vehicle finance.

Remember, AA Inform is home to a range of useful tools and resources, including a personal loan calculator, access to multiple car and home insurance quotes, property valuation reports, and much more.