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How to improve your credit rating

YOUR credit record is a key to your dream home.

But if your record is impaired, you can still repair it.

Every credit active consumer has a credit rating which credit providers may use to determine the interest rate that they will charge a consumer to repay a loan.

Your rating may also play a role in determining the amount of any deposit you may be required to pay as a prerequisite to the loan being granted.

Credit Ombudsman Manie van Schalkwyk says some consumers are aware that credit bureau records will affect whether or not they will be granted a loan, but what most people do not know is to what extent their records may affect the terms of their home loans should they be granted one. Recent statistics released by the National Credit Regulator (NCR) reveal that credit bureaus currently hold records of 19million credit-active consumers.

Of this number, 74% of the inquiries made on consumer records were from banks and other financial institutions.

"Credit providers are obliged to determine your debt repayment history and your existing financial means and obligations as part of their affordability assessment prior to granting you credit.

They do this by obtaining your credit records from the credit bureaus which they subscribe to," Van Schalkwyk said.

According to the NCR, the number of consumers with impaired records is 8.83million.

He said having an impaired credit record does not have to be the end of your plans to purchase a home.

This is what you can do:

  • If you have defaults on your profile as a result of missing payments, try to pay all the accounts religiously. Defaults will be removed from your profile after two years.

  • The manner in which you pay your accounts on a monthly basis reflects in your payment profile for five years, so ensure you pay your accounts regularly.
  • Close off accounts that are paid up as these add to the number of accounts appearing on your credit report. l Some consumers, regardless of having clean credit reports have had their loan applications rejected because they fail the affordability test, so having too many accounts, even though they are paid up may also work against you.
  • If you are having too many open accounts you are regarded as high risk. l To avoid disappointment at a point where you have signed an offer to purchase for that dream home, get a copy of your credit report before applying for a home loan and, if necessary start taking the necessary steps to improve your credit rating.l Credit reports can be obtained from the various credit bureaus and every consumer is entitled to one free credit report a year.

Contact the Credit Ombud to lodge a dispute with regards to credit bureau matters on 0861- 662-837 or visit www.creditombud.org.za

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