Everyone talks about it – but do you actually know what it is?
Credit scores give creditors (like us!) an idea of a person’s ability to repay – but also an insight into your attitude towards credit. How seriously do you take your lines of credit? Short- and long-term loans, credit cards, retail credit, and home loans are just a few examples of lines of credit that, if you allow them to get out of hand, can negatively impact your credit score.
So what can I do about my credit score?
Goal: raise your own credit score and any credit score that will affect your assessment to access capital.
1. Know what your score is
Obvious, we know. But many South Africans are unaware of outstanding judgements, arrears and unpaid bills that might be lowering what otherwise would be a perfectly healthy score. And you have to know what a problem is, to solve it.
Use tools from reputable credit institutions like Experian to review your personal credit score. Many unsecured lenders – ie: companies who don’t require collateral ahead of providing business funding, and Lulalend is one of these – look at the personal credit scores of individual directors. So make sure you are in the healthiest credit position you can possibly be, before applying for short-term capital.
2. Get in touch with your credit providers and make arrangements to repay
If you have checked your credit score (and you should), and have found lines of credit in arrears – repay them! You don’t usually have to repay in total, but get in touch with the credit provider and work with them on a repayment plan that works for you both. Whether it’s an old Store Credit Account card or a vehicle financing plan, providers do want you to be able to pay them back – but it’s up to you to ask .
4. Once you’ve repaid your outstanding credit amounts – clear your record yourself!
Get in touch with a credit bureau and send them the proof of clearance provided by your credit provider, to clear your record quickly. Many providers can take up to 30 days to do this for you – but the faster you get this done, the faster your score will start improving. It’s up to you to clear your name timeously.
5. Pay your levies
One of the most common reasons South Africans have judgements in their credit record is because of property levies, including rental properties. Body corporates and Home-Owners Associations (HOAs) are notoriously enthusiastic about sending letters of judgement against your name because of any lack of payment – even if it’s a bill you didn’t realise or remember you had. So keep an eye on all your incoming emails, particularly the address you’ve used to sign up for any credit.
6. Remove judgements from your name
The word “judgement” can be scary. But there are steps you can take that can help your credit score recover from any judgement. Contact the creditor who has listed you as having a judgement, and make sure to repay them as soon as you can. In order to execute a judgement, they will have to have had an attorney send communication about it – contact this attorney and ask that they write a letter to be sent to court. Following this, a court order will state that the judgement has been rescinded – and your name will be in the clear! Don’t forget to keep a copy of that rescission letter handy in case you need it as evidence of the judgment being cleared.
7. Communicate with your credit providers, before you go into arrears
Tough times can happen to anybody. If you’re worried that you might not be able to pay the minimum required amount back on any line of credit, speak with your provider – it’s a lot easier to work something out and restructure your repayment plan, than to fix a black mark on your credit score. No one wants you to go into debt on their books – be friendly and forthright, and find out what ways forward there are that means staying away from any arrears.
8. Be selective about where, and when, you apply for funding
When you realise that applying for any kind of business funding for your business to stay afloat, it’s very easy to panic. Many people run down a list of traditional lenders (like banks) and SME funders and then apply at all these places in the space of a few days/weeks. And while this behaviour is understandable, it also negatively affects your credit score – every application with a registered credit provider is logged at the credit bureau, and multiple applications in a short timeframe just do not look good.
Be selective, and be financially savvy: pick a provider whose goals align with your own, whose costs are fixed, and whose processes you understand.