Improve your credit rating!

Advice on the best course of action to ensure that you get a loan when wanting to buy property.

 

Getting a loan is not easy at all these days as the new National Credit Act aims to protect consumers from creating debt beyond their means. This does not only make life difficult for consumers, but also for credit providers whom now struggles to get business and this also has an effect on the country’s economy. It is also very embarrassing to have your loan rejected. Having a good credit rating is one of the most important favours you can do yourself in life.

 

So many things depend on this rating – your potential family home, buying a new car, starting your own business, buying clothing and jewellery and also getting a credit card. Having a good credit report enables you to borrow more money at better interest rates. Why? Because the banks know that based on your credit history you are a responsible person. Many potential employers also look at credit reports as a way to judge a person’s responsibility. Your good credit may thus even help you land a new job. There are many more reasons why it is wise to have a good credit rating but it is very easy to get bad credit. Bad credit ratings happen when a person does not pay back money borrowed on time or when that person simply doesn’t pay it back at all. There are varying degrees of bad credit.

 

A person is not automatically given a bad credit rating if he misses a payment or is late a few times. However, if a person is always late or he does not make a payment for several months, his credit rating will be affected and could possible hurt him in the future. Credit ratings, even bad ones, can be improved and fixed.

 

Depending on the situation, with responsible credit usage and prompt payments, bad credit can turn into good credit over time. But like with anything else in life, prevention is better than cure.

 

Remax agrees and decided to share 10 tips on how to ensure that you have a good rating when wanting to apply for a loan:

 

Keep to your regular monthly payments and be sure to make them on time.    

 

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

 

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

 

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

 

Research shows that the average South African spends 75% of his or her 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).

 

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

 

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 over a longer repayment period. It is best to pay something every month, if only to show your good will and establish a payment record in the event they decide to take legal action against you. It is best to get an arrangement in writing stating that they will not take legal action for the period of the repayment arrangement.

 

All your efforts in paying off your debts will work only 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.

 

It is important to note that points number 7 and 8 do not apply for a debt for which there is already a judgement listed against you.

 

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 you should, since you will be paying the attorneys fees as well as the original debt.

 

NB: Don’t ignore a letter of demand, since it is often followed by summons from a court. While it can be very tempting to ignore it and hope that it goes away, be sure that it will only get worse.”