A good credit score is one of the most important financial tools you can have in South Africa. Whether you’re applying for a home loan, car finance, or even a mobile phone contract, your credit score can influence the interest rates you’re offered, the amount of credit you can access, and sometimes even your eligibility for certain financial products. A high credit score is like a key that unlocks better financial opportunities, while a poor score can limit your options and cost you more in interest over time.

If you’re wondering how to improve your credit score in South Africa, you’re not alone. Many people are looking for ways to boost their credit ratings, especially if they’ve faced financial struggles in the past. Luckily, there are several steps you can take to improve your score over time, and for those dealing with overwhelming debt, debt review can provide a structured solution to help you regain financial stability.

In this blog, we’ll walk you through essential steps to raise your credit score, and explain how debt review can help if you’re struggling to manage debt and improve your credit.

Step 1: Check Your Credit Report Regularly

The first step in improving your credit score is knowing where you stand. Your credit report holds all the information that determines your score, so it’s crucial to check it regularly for accuracy. In South Africa, you’re entitled to one free credit report each year from each of the three major credit bureaus: TransUnion, Experian, and Compuscan.

Why It’s Important:

• Checking your credit report helps you identify any errors or discrepancies that could be negatively affecting your score.
• It allows you to spot signs of identity theft or fraudulent activity early.
• By regularly checking your report, you can ensure that all the information is up to date.

What to Do:

• Request a free credit report from each of the credit bureaus annually.
• Review the report carefully for any errors or accounts you don’t recognize.
• Dispute any incorrect information directly with the credit bureau.

Step 2: Pay Your Bills on Time

Your payment history is one of the most important factors in determining your credit score, accounting for roughly 35% of the score calculation. Missing payments can drastically lower your score and remain on your credit record for years. Even if you pay your bills late, it can still have a significant negative impact on your credit score.

Why It’s Important:

• On-time payments show lenders that you’re responsible and reliable.
• Late payments can lower your score and make it harder to get credit in the future.
• A positive payment history can help you build a stronger credit score over time.

What to Do:

• Set up automatic payments for recurring bills like loans, credit cards, and utility bills.
• Use reminders or calendar alerts to ensure you never miss a payment due date.
• Prioritize your debt repayments to avoid penalties and further interest charges.

Step 3: Reduce Your Credit Utilisation

Credit utilisation refers to the percentage of available credit you’re using at any given time. It’s a major factor in calculating your credit score, and ideally, you should keep your credit utilisation below 30%. High credit utilisation signals to lenders that you might be relying too heavily on credit, which can hurt your score.

Why It’s Important:

• High credit utilisation increases the risk for lenders, as it suggests you may be overextending yourself financially.
• A low credit utilisation ratio improves your creditworthiness and boosts your score.

What to Do:

• Keep your credit card balances as low as possible. Try to avoid using more than 30% of your available credit.
• Pay off your credit card balances in full each month, if possible, to avoid interest charges and improve your utilisation ratio.
• Consider requesting a credit limit increase (if it makes sense for your budget) to improve your credit utilisation ratio, but only if you don’t plan to increase your spending.

Step 4: Don’t Apply for Too Much Credit

Every time you apply for credit, whether it’s for a loan, credit card, or even a store card, the lender performs a hard inquiry on your credit report. While one inquiry might not hurt your score significantly, multiple inquiries in a short period can lower your score, as it suggests to lenders that you might be financially desperate or taking on too much credit.

Why It’s Important:

• Multiple hard inquiries in a short time can hurt your score.
• Too many applications for credit may signal to lenders that you’re financially stretched.

What to Do:

• Only apply for credit when absolutely necessary. Be mindful of how many credit applications you make.
• If you need to shop around for a loan (like a car loan or home loan), do so within a short time frame (usually 30 days). Most credit scoring models treat multiple inquiries for the same purpose as a single inquiry.

Step 5: Build a Positive Credit History

A longer credit history generally leads to a higher score. If you don’t have much of a credit history, it may be more difficult to build a good score. However, it’s not just the length of time that matters—it’s the quality of your credit history as well.

Why It’s Important:

• A longer history of on-time payments builds trust with lenders.
• Lenders prefer to see that you’ve been able to manage credit over a longer period without falling into arrears.

What to Do:

• Keep older accounts open, even if you’re not using them often. The longer your credit accounts remain active, the better it is for your score.
• Consider taking on a small, manageable loan (like a credit card or small personal loan) to build a positive credit history if you don’t have much history yet.
• Avoid closing old accounts, as it can shorten your credit history and impact your score negatively.

Step 6: Clear Defaults and Debt Collections

If you’ve had any accounts in default or handed over to collections in the past, it’s important to address these as quickly as possible. Defaults can stay on your credit record for up to 5 years but settling them will stop them from negatively affecting your credit score.

Why It’s Important:

• Defaults can significantly lower your score and make it harder to get credit.
• Paying off defaulted accounts or settling them in full helps reduce the negative impact on your score.

What to Do:

• Contact creditors or collection agencies and negotiate a settlement if you’re unable to pay in full.
• Once you’ve settled a debt, ask the creditor to update your credit report to show the debt as settled or paid in full.
• If you can’t pay the debt in full, negotiate a payment plan that works for your budget.

Step 7: Consider Debt Review for Financial Relief

For those struggling with overwhelming debt, debt review can be a game-changer. Debt review is a legal process in South Africa designed to assist individuals who are over-indebted. If you’re unable to meet your debt obligations and are struggling to keep up with payments, debt review can help you restructure your debt into more manageable payments, protect you from legal action, and improve your financial situation over time.

Why Debt Review Helps:

• Lower Monthly Repayments: Debt review consolidates your debt into one affordable monthly payment, helping you stay on track.
• Debt Protection: While under debt review, creditors are prohibited from taking legal action, garnishing wages, or repossessing assets.
• Reduced Interest Rates: Debt counsellors negotiate with creditors to lower interest rates and extend repayment terms, reducing the amount you owe overall.
• Credit Score Improvement: As you consistently make reduced payments and gradually pay down debt, your credit score will improve over time.

How It Helps Your Credit Score:

• Debt review helps you pay off your debt in an affordable, structured way, leading to a more stable financial situation.
• As you clear your debt and make timely payments, your credit score will gradually improve.
• After successfully completing debt review, your credit history will reflect that you’ve responsibly dealt with your debts, which will boost your score.

Final Thoughts: Take Control of Your Credit Score

Improving your credit score takes time and commitment, but it’s an achievable goal. By following the steps above—checking your credit report, making timely payments, reducing debt, and using credit responsibly—you can gradually raise your credit score and unlock better financial opportunities in South Africa.

For those already struggling with debt, debt review can provide the relief and structure needed to get back on track. With the right support and a clear repayment plan, debt review can help you manage your debts, protect your credit, and set you up for long-term financial success.

Contact Zero Debt today and a professional Debt counsellor will guide you to get back on track.