5 Easy Steps to Repair Your Bad Credit Score 

Did you know that 81% of households in South Africa consider access to credit important? But only 33% believe they will be granted access to credit and lending products if they apply. 

The National Credit Regulator found that 40% of credit-active South Africans have impaired credit records. Financial institutions consider these consumers a credit “risk”.

If you’re in a position where you need access to credit, having a good credit score can help you get the best deals. To gain access to credit or lending products a credit score of 600 or more is ideal. 

If you’re struggling with a poor credit score due to monthly repayment issues, brought on by the pandemic, there are simple steps you can take to improve your score and gain access to credit again.  

Here are 5 easy steps that you can take to help you improve your credit score once and for all. 

1. Check your credit report 

Your credit report is a history of how you’ve used your credit over the past 10 years. You have one credit report with every major credit bureau: Experian, TransUnion, Compuscan and XDS. Most creditors will check your credit report with either one of these credit bureaus, so you may want to check your information on all the reports. 

Your credit report is important because credit bureaus use that information to calculate your credit score. Your credit score gives you and lenders an overview of what’s happening on your credit report. 

Checking your credit report and score is important to help you get your credit score back on track. Your credit report will help you understand where you need to improve. Checking your credit score regularly will tell you whether you’re on the right track. 

2. Fix any errors on your report 

Sometimes credit bureaus and lenders make mistakes, it is up to you to identify these mistakes and fix them as quickly as possible. 

While you’re checking your credit report, it is crucial to look out for any errors. If you do spot any contact the credit bureau or your creditor and explain the issue. The credit bureau or your creditor will help you fix the error. 

3. Always make your payments on time 

Your payment history is the most crucial part when it comes to improving your credit score. It makes up 35% of your credit score. If you don’t make your payments on time, your credit score will be negatively affected. 

This includes any payments you are obligated to make. This includes things like a cell phone bill, rent/mortgage, car payments, store card payments, credit card payments etc. Credit bureaus will notice that you’re not making these payments and your score will decrease.

An easy way to ensure you make all your payments and on time is to set up automated payments. Set up a payment schedule on your banking app and pay all your outstanding bills as close to payday as possible. 

4. Check your credit utilization rate

Your credit utilization rate tells lenders how well you’re managing your finances. Ideally, you want your utilization ratio to be less than 30% and greater than 0%. 

You can compare your credit card balance to your credit card limit to calculate your credit utilization ratio. 

For example, let’s say you have 2 credit cards with an R10 000 credit limit and you have an R6 500 unpaid balance on one of the credit cards. Your credit utilization ratio would be 32.5%. To calculate that divide the R6 500 unpaid balance by the R20 000 credit limit. 

In this case, you need to pay off the unpaid debt so that your credit utilization ratio drops below 30%. 

5. Pay off your debts

Paying off your debts can massively improve your credit score. Unpaid debt is one of the biggest factors for poor credit scores. 

There are various ways strategies you can use to pay off your debt. We recommend using the Debt Snowball Method or the Debt Avalanche Method to help you pay off your debt as quickly as possible. 

If these methods don’t work for you, you may need to consider professional help. We specialize in helping consumers with their debt through the debt review process. Debt review reduces your monthly debt repayments by extending the repayment terms so that you can afford other monthly expenses. For more information about debt review click here

Click here to check your credit score today

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