If you manage your credit, you’ll know that it is tracked, but the chances are you don’t realise the role a credit record will play in your future financial wellbeing.
If you’re still not sure what a credit record is, Nico van Staden, Head of Credit at FNB Credit Card describes it as “the documentation detailing payment history of current and previous debt.” Credit providers, including banks, retailers and personal loan companies are required by law to submit detailed information on your credit repayments to the credit bureaus. This includes what date you opened the loan, amount borrowed, outstanding amount and monthly installment. Details such as frequency of payments, any missed payments, overdue accounts or judgements against you are also reflected in your profile.
Why is a credit record so important to you?
Service providers use the information on your credit record to assess your affordability and risk profile. If you miss payment and catch up the following month, the missed payment will be recorded at the bureau and stored for 24 months. The bureau record will show that you are up to date but missed payment the previous month.
A bad credit record can potentially compromise access to finance for important life events such as access to a home loan, car finance, personal and study loans.
How to keep your credit record healthy:
- Have a solid budget in place and carefully monitor your spending habit.
- Avoid taking credit for unnecessary expenses.
- You are allowed to access your credit record profile for free once a year. Take advantage of this to see if there are any defaults or judgements listed against your name, or if there is any incorrectly listed information on your profile.
- Have a debit order loaded on your account for repayments. This is the easiest way to ensure that you don’t miss a repayment.
- Avoid reversing legitimate debit orders on your account when you are financially strained, as this will reflect on the bureau.
What to do if you have a poor credit record?
Firstly, try to catch up on any payments where you are in arrears. This will mean changing your spending habits in order to achieve the end goal. Once you have caught up on your arrears, you will need to start paying back the short-term credit facilities that you have such as credit card, store cards or personal loans. Start with the loan with the highest interest rate and do not be tempted to take out more credit once that loan has been paid off. This will show credit providers that you are willing to pay back loans.
“Cleaning up your credit record is a long process, it can take up to two years before your record is clean again,” concludes van Staden.
Source: FNB. Image: Pixabay