1. Your credit score can affect the chances of your credit card or loan application being approved. Many people want as little debt as possible, but at times, applying for credit cannot be avoided. Whether you need a credit card, or personal loan for unexpected expenses, or vehicle finance, a home loan or student loan, you will need a good credit score before a credit provider agrees to lend you the money.

 

2. A good credit score results in lower interest rates. Whether you need a loan for a home, a car, or even a new business venture, having a good credit score can ensure that you are offered the lowest possible interest rate. Credit providers see a good credit score as a sign to trust you, which means they won’t have to charge a high interest rate because the probability that you will pay the loan back is high.

 

Lower interest rates mean that you can save thousands over the long run, and this saved money can be used towards retirement, paying off other debt, and even spoiling yourself with a much needed holiday.

 

3. Future job applications may be affected by your credit score. Certain employers may, with your consent, insist on seeing your credit report before considering you for a position in their company. An unhealthy credit report could damage your chances of being short-listed as it indicates to the employer that you are a high-risk candidate.

 

4. Your credit score will affect your insurance rates. Many insurers consult studies which show that having a good credit reveals whether the person is more likely to file an insurance claim. Insurers will most likely check your credit score to determine your insurance risk. This will then determine your insurance rates. Essentially, the lower your credit score, the higher the chance you’ll end up paying higher insurance rates.

 

5. Renting a property may prove to be difficult. Similarly, to point 2, potential landlords will review and consider your credit history while conducting their screening processes. This is understandable as your credit history will indicate whether you make payments on time. If you have an unhealthy credit history, it is very likely that your application will be denied.

You are able to work towards achieving a good credit score, or improving your already good credit score. To achieve a good credit score you should:

• Pay your monthly instalments on time. An instalment is the amount of money you have agreed upon to pay back over an agreed amount of time. If you would like to improve your credit score, it is imperative to follow this agreement.
• Ensure that your credit applications and/or enquiries are kept to a minimum. Overly applying and enquiring for additional credit may damage your credit score.
• Do not use more than 40% of your available credit. If you are granted R10,000 credit facility, do not use more than R4,000. By doing this, you will be able to improve your credit score and you will likely be offered more credit in the future if it is needed.

 

Final Thoughts

You should be convinced by now that your credit score is an important part of your life and therefore requires and deserves the right amount of attention. So, empower yourself and get chatting to one of Kudough’s credit coaches. We guarantee you will improve your score if you follow our guidance.

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