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How to improve your credit score

Get the credit score you deserve with our simple and straightforward tips. Learn how to improve your credit score effectively today with ClearScore!

27 January 2017Lucy Burgess 6 min read
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Improving your credit score can increase your chances of getting financial products like bonds, home loans, credit cards, and loans. It's wise to strive for a good credit score, as it can benefit you in the long run.

A credit score is a three-digit number with a maximum value of 740. It represents your creditworthiness. “Creditworthiness” is used by financial institutions to determine whether you’re eligible for credit, loans, or other financial products. A good credit score is essential as it impacts your ability to get loans, credit cards, and home loans at favourable terms. Landlords, insurance companies, and potential employers may also check your credit score in the form of a credit report. There are several ways to improve your credit score - by diligently managing your credit, you can achieve a higher credit score and enjoy the benefits that come with it.

Maintaining a good credit score is crucial to your financial health, and understanding what makes a strong score is essential. A credit score between 634 and 637 is considered good, but a score ranging from 658 to 740 is considered excellent! Within this range, you’ll have access to better credit options and lower interest rates, making it easier to achieve your financial goals. However, if your credit score is hovering below the 634 mark, there are ways to improve it. By taking early action to improve your credit score, you can take control of your financial situation and enjoy better borrowing opportunities in the future.

Credit scores are essential, particularly when getting loans or credit. But have you ever wondered how credit scores are calculated? The process can seem puzzling at first, but credit scores get calculated using a range of factors like your payment history, credit utilisation, length of credit history, types of credit, and recent enquiries. These factors give you a credit score ranging from 0 to 740, with a higher score showing better creditworthiness.  When you understand these factors, you can take measures to improve your credit score.

A good credit score is essential for many aspects of life. It reflects your financial responsibility and determines your eligibility for loans, credit cards, and other payment plans. With a high credit score, you can enjoy lower interest rates and fees, making it easier to access funds when needed.

On the other hand, a low credit score can make it challenging to secure loans or credit cards, as financial institutions see people with poor credit scores as high-risk borrowers - there’s a chance you may not pay them back. Therefore, it’s crucial to have a good credit score. If you’re not sure how to improve your credit score, there are several strategies you can consider.

Your credit score is a vital aspect of your financial health, and it can influence whether or not you are approved for loans, credit cards, and mortgages. Several factors affect your credit score, including payment history, credit utilisation, length of credit history, types of credit and the number of credit applications. A single missed payment or high credit utilisation rate can significantly impact your score. So it’s good to keep track of your score and to try to improve it where possible.

Let’s have a look at these seven steps that can help you to improve your credit score.

1. Keep your credit utilisation low

Try to maintain a low credit card utilisation, preferably below 30-50%, as it shows responsible credit management to lenders, which can help improve your credit score. You can easily monitor your credit utilisation by accessing your ClearScore account.

2. Pay your outstanding debt on time

When you don’t pay bills on time, it can negatively impact your credit score. You can avoid this by setting up direct debits for utility bills, phone expenses, and credit card payments. This way, you'll have less to worry about while improving your credit score.

3. Fix mistakes on your credit report

Errors on your credit report, such as a misspelt name or an incorrect address, could negatively affect your credit score. Mismatched credit accounts that don't reflect on your report can lead to missed opportunities to build a positive credit history.

To detect and resolve these inaccuracies, access your credit report and raise a dispute outlining the issues through the help section on our website. Further details can be found on our FAQ page.

4. Check your credit report for fraud

Carefully monitoring your credit report can help you detect signs of financial fraud, including unauthorised credit accounts or unfamiliar enquiries that may indicate identity theft. Given the impact fraud has on your score, it’s good to quickly raise a dispute to correct any errors when they are identified.

5. Diversify how you monitor your credit score

Credit bureaus, which collect information on borrowers for credit risk assessment, receive various details on you from lenders. Experian, one of the four major South African credit bureaus, partners with ClearScore, and we offer your credit score and report for free. The other three bureaus in South Africa are TransUnion, Compuscan, and XDS. To get a detailed overview of your finances, it's advisable to contact all four firms. Try select bureaus that offer free trial access to your data (remember to cancel the subscription before the trial concludes). Some bureaus may need to pay for your credit score and report. With ClearScore you can check your credit score online for free.

6. Plan ahead when you need credit

Credit applications can trigger enquiries on your credit report that could negatively affect your credit score. Strategic planning before any significant credit application can help maintain your credit score by setting your credit report in order. This increases the chance of a successful application and reduces the risk of a negative impact on your credit score.

7. Build your score by using your available credit carefully

Using credit responsibly is crucial for improving your credit score. Keeping a credit card active and paying (small amounts each month) shows you’re creditworthy. This way, you prove your ability to repay what you borrow - and it gives lenders confidence that you're a responsible credit user.

If you want to improve your credit score, it's vital to understand that there's no one-size-fits-all answer to the question of - how long it takes. The exact timeframe for improving your credit score will depend on different factors, such as the starting point of your credit score and the actions you take to improve it. With that said, if you follow the general guidelines covered in this article, then you might be able to improve your credit score. By taking these steps and being patient, you can put yourself on a path to financial success.

If you don’t have a credit score - don’t worry. You’re not alone. There are many reasons why someone wouldn't have a credit score, such as being new to using credit (a “thin file”) or not having any credit history. The good news is that there are steps you can take to start building your credit score.

1. Apply for a secured credit card

One way to do this is to apply for a secured credit card. A secured credit card is a type of credit card that requires a cash deposit or asset (a car) as collateral to get a line of credit.

2. Become an authorised user on someone else's credit card

Being an authorised user on someone else's credit card can provide you with benefits. It can help you access credit that you may not be able to get on your own, and it can also help in improving your credit score. When you become an authorised user, the payment history will reflect on your credit report, which may.

This may increase your credit score. However, becoming an authorised user can be risky if the primary cardholder does not use the credit card responsibly. Therefore, it’s essential to communicate clearly with the primary cardholder and have a repayment plan that works for both parties.

3. You could apply for a store card or low-cost cellphone contract

It will give you the chance to start building your credit score and history when you consistently pay the amount you owe. Over time, these habits can help improve your credit score and open doors to opportunities such as getting approved for a loan or a credit card with favourable terms.

Remember, building your credit score is a marathon, not a sprint. But with effort; you can achieve your financial goals and improve your credit score.

Lucy Burgess Image

Written by Lucy Burgess

Global Content Manager

Lucy has a wealth of personal finance knowledge, and is one of our in-house experts.