3 Ways to build your credit score
If you haven’t given much thought to your credit score before, here’s why you should: this three-digit number is essentially used as an indication of your creditworthiness and can affect your access to finance like home loans, personal loans and vehicle finance. It can also affect the interest rate you’re offered.
Your score is calculated by the credit bureaus and is based on a number of different factors, including your past credit performance, your current debt, and how often you apply for new credit. So, what can you do to build or improve your score?
1. Apply for credit
You have to start somewhere, so consider applying for a store card or credit card. The idea here is show good payment behaviour, so be sure to use your card responsibly and make your payments each month. This will help you to start building up a positive credit history.
2. Pay your bills on time
This is a very important step, as making late payments – or worse, missing payments altogether – is one of the quickest ways to damage your credit score. So, the sooner you get into the financially-savvy habit of paying your bills on time, the better.
3. Be wise with credit
Try to avoid using your full credit limit, as this can not only put you into a difficult situation when it comes to making your repayments, but can also affect your credit score. It’s also a good idea to avoid applying for new credit too often. Each time you do, the financial institution involved will run a credit check on you, which also affects your score slightly.
It takes time to build up a good credit score, so keep demonstrating good payment behaviour to ensure that yours grows over time. And remember to check your ‘credit health’ from time to time by accessing your credit report – you can request a free report on an annual basis from any of the main credit bureaus.
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