RESERVE Bank data indicates that in January South Africans increased their borrowings at the fastest pace in two-and-a-half years.
But few of these borrowers are likely to be young graduates, given the fact that they are considered too high risk by banks.
When applying for credit or contracts young graduates might not meet the required credit score needed.
This means that in order to get credit people need to have existing credit - a catch-22 situation that many young people find themselves in.
But there are some options available to them that will help them build a credit score, according to Phil Penlington, head of Product Growth at FNB Loans.
"In the event of a graduate having little or no credit history, their debt servicing capacity and ability to repay debt is unknown," Penlington said.
This makes it risky for banks to lend to them, he said.
"Ideally graduates should open a retail account like a store card," Penlington said.
"It is, however, important that young people do not overextend themselves in terms of unsecured lending."
Another option is to apply for and (carefully) use a credit card. Some banks offer student credit cards. Nedbank, for example, offers a "Design Student Credit Card", and to qualify you need to be a South African registered student at selected universities, between the ages of 18 and 24.
The card is "a credit card designed especially for students to give you the opportunity to build your credit record with Nedbank," according to the bank's website.
It also features "low credit lines to teach you how to manage your money while having access to credit".
Absa has a similar credit card for registered students who have an income or allowance of R200 a month.
Peter Schlebusch, CEO of personal and business banking at Standard Bank, said that Standard Bank's "dedicated youth division" is in place to cater for young people.
According to the credit bureau Experian, a short credit history will be represented by the customer's record being neither good nor poor.
This will mean that when applying for credit, the information provided in the application, as well as the lender's individual credit policy, will play a large role in an application being accepted or declined.
Once all accounts are paid up to date and on time, it may take a couple of months for this to reflect positively on your credit score.
Key to creditworthiness
RESERVE Bank data indicates that in January South Africans increased their borrowings at the fastest pace in two-and-a-half years.
But few of these borrowers are likely to be young graduates, given the fact that they are considered too high risk by banks.
When applying for credit or contracts young graduates might not meet the required credit score needed.
This means that in order to get credit people need to have existing credit - a catch-22 situation that many young people find themselves in.
But there are some options available to them that will help them build a credit score, according to Phil Penlington, head of Product Growth at FNB Loans.
"In the event of a graduate having little or no credit history, their debt servicing capacity and ability to repay debt is unknown," Penlington said.
This makes it risky for banks to lend to them, he said.
"Ideally graduates should open a retail account like a store card," Penlington said.
"It is, however, important that young people do not overextend themselves in terms of unsecured lending."
Another option is to apply for and (carefully) use a credit card. Some banks offer student credit cards. Nedbank, for example, offers a "Design Student Credit Card", and to qualify you need to be a South African registered student at selected universities, between the ages of 18 and 24.
The card is "a credit card designed especially for students to give you the opportunity to build your credit record with Nedbank," according to the bank's website.
It also features "low credit lines to teach you how to manage your money while having access to credit".
Absa has a similar credit card for registered students who have an income or allowance of R200 a month.
Peter Schlebusch, CEO of personal and business banking at Standard Bank, said that Standard Bank's "dedicated youth division" is in place to cater for young people.
According to the credit bureau Experian, a short credit history will be represented by the customer's record being neither good nor poor.
This will mean that when applying for credit, the information provided in the application, as well as the lender's individual credit policy, will play a large role in an application being accepted or declined.
Once all accounts are paid up to date and on time, it may take a couple of months for this to reflect positively on your credit score.
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