-A Good Credit Record…

Credit Record

Some tips on keeping a good credit record:

Credit rating: A less than perfect credit record will negatively influence a bond application, and in extreme cases, bad credit may even lead to bond approval being refused.

Any lender will undertake credit checks on all home loan applicants, which will provide them with information on how much credit they have applied for, the state of their credit accounts, how they have been managed and their blacklist-status.

Credit scores aim to predict how likely the applicant will be to honour their credit commitments in the future. To a large extent, loan approvals are based on the applicant’s credit scores, as it is used by lenders to identify the risk in offering them credit.

The following 10 points will help you to maintain a healthy credit record:

1. Keep to your regular monthly payments, and make the payments on time.

2. If you fall into arrears, get up to date as soon as possible and don’t fall behind again.

3. Don’t pay less than the minimum instalment each month, so be sure you can afford the instalments before applying for the credit.

4. To determine whether or not you can afford your repayments, draw up a monthly budget for yourself. The trick is to stick to it and cut out unnecessary expenses if need be.

5. Research shows that the average South African spends 75% of his or her after-tax-income on debt, which doesn’t leave much for anything else. Reduce your debt by paying more than the minimum payment on your accounts. Do it one at a time starting with the most expensive debt (the one with the highest interest rate).

6. Aim to reduce the amount of money that goes on debt every month to between 30% and 50% of your after tax income.

7. If you are unable to make a payment due to unforeseen circumstances, talk to the creditor concerned and make alternative arrangements to pay back what you owe. They may well accept reduced monthly payments spread out over a longer repayment period. It is best to pay something every month, if only to show your goodwill and establish a payment record in the event they decide to take legal action against you. It is best to get an agreement in writing stating that they will not take legal action for the period of the repayment arrangement.

8. All your effort in paying off your debts will only work if you do not take on more debt. So, when you are tempted to buy something, remind yourself that you are trying to pay off your accounts and that it will be worth it to be patient for a while.

9. If you have an old legal debt, you are far worse off if you pay it off through collection attorneys. You will probably pay a lot more than what you should since you will be paying the attorney’s fees as well as the original debt.

10. Don’t ignore a letter of demand, since it is often followed by summons from a court. While it can be really tempting to ignore it and hope it goes away, be assured it will only get worse.