Sometimes we need to access credit for emergencies, student loans, or to buy a car. The key is to try and get the best possible interest rate ‒ which means you need a good credit score.
Credit bureau Compuscan shared some insights into factors that affect your credit score.
Firstly, do not max out all your credit lines like store accounts and credit cards, as this will negatively affect your score.
They advise that you have a good mix of accounts on your profile. Different types of accounts hold different scoring weights. You will improve your score more if you can show good repayment behaviour on a secured account like a home loan or car finance than on an unsecured account like a personal loan.
Your repayment behaviour is much more important than the type of accounts you have. You should not open accounts just to try and improve your credit score if you don’t need them. Paying your credit card in full at the end of the month will give you a much better rating.
Another factor is the length of period of good repayment behaviour. Making regular payments over an extended period of time will improve your credit score.
The score also looks at your number of recently opened accounts. Your score will be affected negatively if you open new accounts one after the other within a short period of time.
The credit bureau also warns against relying on payday loans. This creates the impression that you are reliant on credit to survive, posing a risk to lenders.
They also advise that you talk to your credit provider if you are unable to make a payment to see if an alternative repayment agreement can be reached. And you should never ignore a letter of demand for payment or a summons to court for non-payment.