‘Credit’ is another name for ‘borrowing’. According to TransUnion,1, any business, such as a financial institution, lends its money based on the amount of risk involved. Lending money to someone with a bad credit score or no score at all could pose a severe risk to the lender. After all, a credit provider needs to see returns on the amount of credit allocated. Please see below for further information regarding Transunion’s tips to improve a credit score or visit the Transunion website.
How is your credit score determined?1
A credit bureau evaluates your credit score using your credit history report, how you settle your bills, and how much debt you have. It also compares your performance to that of other credit users.
What is the credit score not? 1
Your credit score is not there to condemn your credit history and is not used to see if you qualify for credit. This is because each specific credit provider has its own particular credit scoring system, and will decide if you are eligible or not.
The credit score is used by credit providers1
Credit providers still use your credit score because it supplies them with easily accessible information about your credit behaviour. Make a determined effort to obtain your credit score. Knowing your credit score will give you an idea of a poor or good credit risk to the credit providers. It will also show you areas of improvement to enable you to qualify for more credit.
Should you have a poor credit score, please consult the below points that show you how to improve.
How well do you pay your accounts? 1
It’s important to honour the entire instalment required each month. Your credit report will reveal such failures. Seeing irregular payments affect your score, ensure paying the whole amount needed every month and on time.
Debt is too high1
This is when you already have too much credit. Avoid maxing out your credit card or shop account by not exceeding say R400 of a R1000 credit limit.
Avoid court judgements1
If your credit report shows that courts have issued administration orders against you, it will show the credit providers you cannot meet your debt requirements. You can solve this by meeting all your obligations regularly and on time so that your history improves over time.
For how long have you had accounts? 1
A ten-year-old account showing good paying behaviour speaks volumes compared to a 1-year-old account. In addition, the more accounts you have, such as cell phone accounts and service contracts, the better your credit history could be if they are all paid on time every month.
Take time to open accounts1
Avoid opening many accounts all at once, as this could show that you are in financial trouble. Instead, take time to open different accounts.
Car insurance is also about risk, and insurers will charge a higher premium for a higher risk driver. We need sufficient cover for our cars in South Africa, with the risk of driving on South Africa’s roads in mind. If you are not sure about or are unhappy with your current cover and require more information on car insurance products, why not contact Prime South Africa?
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