Do you intend to take out a loan from one of the biggest financial institutions in South Africa? Do you know what your credit score is? Do you think you have a good credit score for applying for a personal loan? If you are wondering about these questions for some time, you have come to the right place.
In our previous blogs, we have always talked about the different types of loans you can apply for, the lenders, and their terms and conditions to approve the loan application. And there is always one thing in common, you must have a good credit score to apply for a loan online and get it approved without any hassle. But what does it mean to have a good credit score or rather what is a credit score? Let’s look.
Credit Score: What is it?
In simpler terms, a credit score can be defined as a numerical score that tells the loan lender that how consistent you have been in repaying your previous debts. It also indicates whether you repaid your loan in the given loan term or not.
If you have a good credit score, the lender will consider you at a low liability risk and approve your application easily. You might also get a lower interest rate. However, a bad credit score will cause problems in approval.
A bad credit score indicates that you have previously defaulted, paid the loan after your term had ended, or have applied for too many credits. This tells the lender that you are at high liability risk. This gives the loan lender the right to reject your application or charge you a higher interest rate.
Anytime you apply for loan online, your credit score will be evaluated. This will determine your eligibility to get approval on the loan application.
Credit Score: How do I know if it’s good or bad?
So, there is a simple scale to determine if your score is good or bad.
- 579 and below: Poor
- 580-669- Average/Good
- 670-739- Very Good
- 800+- Outstanding
You can keep this scale in your mind when determining whether your credit score is good or bad. Anything above 580 will certainly make it easy for you to apply for a loan online. You can easily get your application approved and might also get lower interest rates.
So, if you haven’t paid attention to your credit score, now is the time. Look at your credit score and if you find it below 580, make conscious efforts to improve it. However, you should know that improving your credit score will require time. Although, there are a few ways you can choose to improve your credit score gradually.
Credit Score: 7 Ways to Improve
Here are 7 ways that you can use to improve your credit score gradually. You must choose the way from the list as per your situation. Every improvement way mentioned here might not work for your situation. However, knowing about it will certainly give you an idea about how to improve your credit score.
- Learn about your credit score
The first step to improve your credit score is by becoming aware of it. There is no point in ignoring your credit score. Knowing about your current credit score will allow you to improve it efficiently and quickly. In South Africa, you can apply for one credit score report every year. You can apply to credit bureaus such as Credit Genie or TransUnion to know your credit score.
- Repay your existing debts on time
Another way to improve your credit score is by making sure that you repay your existing debts in time. Don’t default or delay your repayments. If you didn’t know this already, a third of your credit score is determined by your ability to make repayments on time.
- Bring some stability in life
To improve your credit score, you need to bring some stability to your life. You can do so in several different ways simultaneously. First, start by getting a stable job or source of income. Make sure you don’t change your address too frequently. Keep an eye on your spending habits. Don’t max out your credit cards and make sure not to spend on things that you don’t necessarily need. If it is not crucial for your survival, do not buy it!
- Avoid any instances that can drag you in court
Several lenders see courtroom drama as a liability risk. When you are summoned to the court for a hearing, you might not have time to work and thus repay your loan. Hence, avoid instances that can drag you to the court.
- Borrow what is necessary
Make sure that when you want to get loan online, don’t borrow more than what is necessary. If you have a good job and monthly income that can fulfil your daily needs, borrow only what you need and what you can afford. If you borrow more than what is required, you might lapse your repayment which will affect your credit score negatively.
- Low amounts of high limit credit cards
This is generally a good situation to be in. If you have a credit card with a high spending limit but you made the repayment in full and have a low amount left at the end of the month, your credit score will improve.
However, make sure that reduce your credit limits when you are applying for a home loan. A high credit limit might be seen as a liability by some lenders.
- Don’t make a regular credit application
Make sure that you don’t apply for credit loans frequently. This is an indication that you have poor management of your finances and thus need external finances to cover costs. This will negatively affect your credit score.
So, these are a few ways that help you improve your credit score efficiently. And if you want to apply for a loan, you can check out our website at Snappy Loan.
We have gathered all the latest loan offers from prestigious lenders in South Africa. You can search, compare, and review different loan offers and make a direct application on the lender’s website.
You can also read our previous blogs to gain more information on applying for a loan in South Africa from different credit providers.
Visit our website now.