Discover how to build your credit score in South Africa

• Skip ahead

  [01:02]  What is a credit score?

  [01:51]  Do you always take the loan you qualify for?

  [02:35]  Good credit principles to live by

  [03:40]  How do you build a reputable credit score?

  [04:35]  How does your credit score work as a couple?

  [05:04]  Good debt vs bad debt

  [07:44]  Taking out debt for somebody else

  [08:23]  Knowing your credit score

  [08:47]  Financial planning – how do you do it?

  [10:09]  Debt review or liquidation – what do you need to know? 

  [10:48]  Credit cards

  [12:15]  How do you improve your credit score?

  [14:14]  Top tips on credit

What you need to know about credit as a young professional:

• What is a credit score?

  A credit score is an analysis of an individual’s credit history over the last two to three years. It is a calculation used by lenders to determine whether an applicant qualifies for credit or not, and at what rate, based on their spending history and what this indicates about their ability to repay monies lent to them.

• How do you build a good credit record?

  As a young adult, you should allow your credit record to develop organically. Don’t try to manipulate it by taking on extra credit you don’t need, and avoid taking on excessive amounts of debt just because you qualify for them. A good credit record is a reward for responsible financial management, and dependable payment of your debit orders month to month.

• What are good debts and bad debts?

  Good debt is affordable debt that can help you can reach your goals and objectives faster; produce greater value over the long-term, such as education or a home loan; or cover medical bills to improve your quality of life. Bad debt is debt that funds your lifestyle and doesn’t produce any long-term value.

• How does a bad credit rating affect you?

  A bad credit rating means lenders may be unwilling to provide credit to you, resulting in the loans you wish to take becoming unattainable. Should you still qualify for the credit, it will be provided at a higher interest rate, making it far more expensive for you to borrow money.

• What is a good credit score in South Africa?

  A good credit score in South Africa is between 650 and 669, while an excellent credit score is above 670.

• How do I improve my credit score?

  To improve your credit score, you’ll need to demonstrate sound financial management over a period of up to three years. This includes:

  • Avoid getting into arrears on any of your repayment obligations
  • If you have surplus funds at the end of the month, pay as much as you can into your existing loans, prioritising your short-term debt. This will also save you money by reducing the overall amount of interest you will pay
  • Be vigilant in tracking your finances and disciplined in how you spend them. Avoid buying luxury and expensive items on your credit card and using debt to maintain a lifestyle that your income cannot cover.