Your credit score changed – now what?

It’s normal for your credit score to fluctuate from month-to-month. As your lenders report your credit behaviour to the bureaus, your score will go up, down, or remain constant.

The direction it takes will depend on whether you abided by your credit agreements, and whether you made responsible choices regarding credit.

For example, if your debit orders fail and you miss your monthly repayments, you will have broken your credit agreement, and this will be reported to the bureaus.

Similarly, if you apply for three new loans during the same month, the bureaus will think you’re irresponsible with credit, and your score will decline.

By regularly checking your credit report, you will be able to take action to assist or correct its course. Depending on where your score currently stands, you should do the following:

1. Your score went down

Your credit score can go down for several reasons, such as missing one of your monthly repayments or making too many credit enquiries over a short period of time. Your lenders – as well as prospective lenders – will inform the bureaus of your negative credit behaviour and your score will decline.

However, you can restore it to a boastful number by correcting these errors. On your credit report, you will see exactly which factors impacted your credit score:

• Credit enquiries: If you apply for vehicle finance from five different providers, then your credit report will reflect five individual enquiries in a single month, which will decrease your score. Rather than doing this, you should only apply for credit you need and minimise your credit applications over the short term.
• Open accounts: If you only have one open account that’s younger than a year, then your credit score will be reluctant to grow. The older your accounts are, the more proof there is of your successful experience with credit. If you’ve paid off an account, leave it open rather than closing it for a new account.
• Past credit utilisation: You should never utilise more than 30% of your available credit. For example, if you have access to R10,000, you should avoid using more than R3,000. If you cross this threshold, your credit score will slowly decline. By reducing your credit utilisation each month, your credit score will slowly improve.
• Missed payments: Even if you are only one day late on your repayments, it will be considered a “missed payment”. This will reflect on your credit report and decrease your score. If you feel that you should not have been penalised, reach out to your lender and explain your case. Following this, make sure you never miss a payment again.
• Defaults: This is when you have missed several payments for an account, and your lender will report your account as being “in arrears”. If there is a reason you are unable to meet your payments – immediately reach out to your lender and discuss a new payment plan so that your credit score will no longer be impacted by this.
• Court judgements: This is when your lender takes legal action against you for not honouring your credit agreement. If you receive a court judgement against your name, it will remain on your credit report for 5 years. During this time, you should stick to the court ordered payment schedule and – once it’s settled – you should request to have it removed from your report.

2. Your score went up

It’s satisfying to watch your credit score increase each month. You know that your hard work is paying off, and it will ultimately benefit your future. There’s no reason to stop here, and you can continue to take positive actions to improve your score even further.

Having a growing credit score also means that you may qualify for new financial products. On ClearScore, we connect you with the products you are most likely to be approved for – based on your credit score and personal information, such as your monthly income and employment status.

Be careful not to become complacent when your credit score remains constant. There’s always an opportunity to grow your score, and you never know when you will need to rely on it for an important moment in your life – such as securing your first home loan.

In some cases, you may be surprised to see that your credit score is stable because you recently interacted with a lender and expected it to increase. However, don’t be alarmed. It takes time for new information to reflect on your report, and lenders report to the bureaus on their own schedules.

In the meantime, you can continue to take positive actions that will increase your credit score in the long run. Here are some ideas:

• Reduce your credit utilisation to below 30% by paying a lump sum to your lender
• Pay slightly more than the required monthly amount
• Protect yourself against fraud – read this article for more information
• Make sure there aren’t any errors on your credit report
• Add diversity to your credit mix – but don’t take out credit you don’t need

Overall, you need to be patient when it comes to your credit score. More than anything else, it takes time for your good credit behaviour to properly reflect on your report.