Our credit score is one of, if not the most, important aspects when applying for credit. This score is a fluctuating number and everything that you do with credit or debt affects it. This score helps your creditors judge how much risk there is when giving you credit. The better the score the better the chance of a successful application for credit.
Having a better score will also affect the interest rates and terms that your creditors offer. If you have a high score, this tells the creditor that you are a lower risk. This allows them to offer you reduced interest rates or even longer terms to repay the debt. The little things you do today can affect your chance of buying a house or car in the future.
Follow the tips below to clean up your score:
Don't withhold payments if you have a dispute with your creditor. There are proper processes in place to assist you with disputes and not paying will reflect on your credit profile for the next two years.
You should try to keep your retail and loan debt below 20% of your annual income. This way you will still have negotiating room when applying for bonds or vehicle finance. Trim the debt you aren't using. Don't hang on to credit cards or accounts that you are not using. Often we will say that we will keep an account for an emergency. If we have access to a credit card we will always justify using it, even when the emergency is not that urgent.
These debts that you are hanging onto will affect your score as your exposure will be high. As in the point above, your 'emergency credit card' could be the reason that you cannot buy that car. Closing these extra accounts will immediately increase your credit score as it demonstrates your responsibility and reduces your exposure.
The following are some items that will decrease your score: