2001, we’ve seen a huge increase in the desire for “bad” credit. This is
credit that feeds consumerism and the need for immediate gratification.
Methods used in curbing this indulgence have had an adverse effect on the
availability of “good” credit (credit used to build assets). Those
wanting to take advantage of the current market opportunities, are finding it
difficult to qualify for credit, as credit providers are being selective as to
how they part with their limited funds available. So how do you ensure
that you are first in line when it comes to credit extension?
Unnecessary Facilities All credit
limits granted, whether used or not, are taken into account when evaluating
your affordability. Hence if you have an overdraft facility that you are
not utilizing or a credit card limit of R60 000, where you only need R10 000,
reduce this accordingly.
Have Some Form of Credit Facility
It is very
difficult for banks to assess your credit management if you don’t already have
an existing credit facility. Having no credit facilities will
reduce your credit scoring.
Pay Your Accounts on Time, Every Time If your
account is due on the 30th of the month, but you are in the habit of only
paying 10 days later, you will be listed as a bad payer. If one month you
pay a double instalment and the next month you don’t pay your account, you will
be listed. Always pay an instalment on your account, on time, to avoid
being listed as a bad payer and possibly even having your credit scoring
Avoid Bounced Cheques / Debit Orders
cheques or debit orders are returned due to insufficient funds, your credit
scoring at that particular bank will be adversely affected, even if you sort
out the problem the very next day.
applying for credit at another financial institution, they will request 3 to 6
months bank statements and possibly even a “code” from your banker. If at
the time your unpaid items are still evident, they bank may refuse to grant you
Check your Credit Record
the various credit bureaus and make sure that you have not been inadvertently
listed. You are entitled to a free report once a year. Immediately
dispute any adverse record you don’t agree with or sort out any outstanding
listing. This information is available to all banks and they will not
grant any form of credit extension if you currently have unresolved debt
are problems, call the Credit Information Ombudsman at their call centre on
0861 662 837
suspect that you will be entering difficult times in future, make plans to
release equity on your assets, obtain additional finance and reduce existing
expenditure. Make hay while the sun shines, because once you are in
trouble, it will be very difficult to convince anybody that you are worthy of
using a Financial Coach to help you prepare a budget and assist you in setting
out a plan for your finances.
Have Updated Financials
very surprised at how many self-employed entrepreneurs don’t have updated
financial statements and management accounts. How do you manage your
business? Without management accounts, you are sending out a clear
message that you are not on top of the financial aspects of your
business. How do you propose convincing anybody that your business can
continue sustaining itself and provide you with future income? Financial
statements and management accounts are the foundation for successful business
management. They reflect the history of your business, your income and
expenditure and the flow of funds, and without them it is almost impossible to
assess your credit worthiness.
Avoid Trading in Cash
If you run
a cash business, deposit your cash into your bank account. Even if you
have accurate financials, but the bank is unable to verify your turnover
through your bank account, they may refuse to grant you credit. One can
always argue that you are avoiding depositing cash to reduce the bank charges
on cash deposits, but then the bank will require your latest tax assessment.
on a Preprepared Budget
easier said that done but very easy once done. People who have fallen into the
habit of preparing a budget and sticking to it will testify as to how it has
liberated them financially and actually provided them with more spending power
due to reducing unnecessary expenditure and random spending.
you apply for a loan or provide your Social Security number for credit, it’s
likely your credit report may be pulled. This is called a Credit Inquiry. A
large number of inquiries appearing on your credit profile over a short period
of time may be interpreted either as a sign that you are opening credit
accounts due to financial difficulties or overextending yourself by taking on
more debt than you can easily repay. Apply for new credit in moderation. A
credit coach will help you identify where inquires are on your report and how
to best manage them.
always eager to blame circumstances and the current market conditions for the
position we find ourselves in. Without sounding insensitive, 80% of all
declines are due to applicants not taking responsibility for their credit
worthiness. In the past, credit was easily available, unfortunately to
the detriment of a healthy fiscal environment. Credit is still available,
but it is up to you to prove credibility.
the Temptation of Offers
to establish a reasonably good financial foundation before a lender will
approve you for a mortgage loan. Lenders look for a good credit rating,
sufficient funds to make the initial down payment and pay the closing costs,
and a stable employment situation.
have just qualified for a mortgage loan are usually in better-than-average
financial shape. If you have recently purchased a new house, don't be surprised
if you receive numerous offers from retail stores and other credit card
companies offering you pre-approved revolving credit.
about accepting these offers! New home owners often use most of their savings
in the process of financing the transaction, and they need everything from
linens to furniture to get settled in the home. With all of the immediate
credit available, it may be very tempting to just say "charge it." If
you're not careful, you could be "up to your ears" in debt very
quickly. It takes discipline to reach the goal of home ownership--and it takes
that same kind of discipline to maintain financial health after you leave the
for new credit with wisdom Don’t
apply every time you see an offer. Getting too much credit too quickly can hurt
your credit profile. Remember to print clearly when applying for credit. If
your application information is entered inaccurately it can create variations
of reported information on your credit report. Consistently use your complete
name without any variations. Providing complete, accurate and consistent
identification on your credit applications helps set up your credit history
correctly from the beginning. It also minimizes the chance that your credit
file will be incomplete or mixed with another consumer's file.
old accounts is good - Many people believe closing old and inactive accounts is
an effective means of managing their credit. But they should think twice before
closing their older and more established accounts on their credit report. Cancelling
old credit accounts can significantly lower a credit rating by making the
credit history appear shorter. You should consider storing or cutting up a
credit card you don’t intend to use instead of having it cancelled or closed.
Paying off a negative record will remove it from your credit report - Negative
records such as collection accounts, bankruptcies and late payments will remain
on your credit report for 5 to 10 years depending on current legislation.
Paying off the account before the end of the term doesn't remove it from your
credit report but it will cause the account to be marked as "paid."
It’s still a good idea to pay your debts in full. Just be aware the major
positive impact in your report and profile will be achieved when the negative
Co-signing for an account doesn’t make you responsible for it - When you open a
joint account or co-sign on a loan, credit card or other credit account, you
are taking on full legal responsibility. Your credit and capability to acquire
new credit will be affected. If the party you co-signed for does not pay their
bill it will have the same impact as if you didn’t pay. Any activity on these
shared accounts, good or bad, will show up on both parties’ credit reports. If
you co-sign for a friend's auto loan and they don't make the payments, your
credit profile will be equally hurt by their actions or lack-thereof. The only
way to stop this double reporting and negative impact is to pay the loan off or
refinance the debt without you as a co-signer. In general, you should think
twice before you co-sign for anyone. If you do decide to co-sign, consider
keeping it restricted to responsible family members. .
Paying off a bill will add points to your credit rating – Your credit rating is
achieved by considering a variety of factors. These “formulas” often change
based on the economy and the bank’s current view to credit risk. It is very
hard to predict how many “points” you can gain by changing one factor. Just
keep paying your bills on time, reducing your debts and removing negative
inaccuracies from your credit report. Good financial behaviour over time is
what you are looking for to build a good credit rating.
details on the various costs involved in buying a property go here For more detailed information on Finance issues go here Go back to Buyers main page