The link between your money mindset and your credit score

There is a definite link between your money mindset and you credit score. Foundational experiences with money stem from your childhood, where your family’s spending and debt management habits influenced their (and your) relationship with money.

According to the National Credit Regulator, South Africans owed R2.31 trillion in 2023, with short-term credit increasing by R235.09 million. This growing consumer debt highlights South Africans struggling to make ends meet and their need for credit, says Ayanda Ndimande, strategic business development for Retail Credit at Sanlam.

“Your relationship with money is complex, shaped by your upbringing, family behaviours, relationships, age and even your career choices. But did you know this ‘money personality’ you developed can directly affect one of the most important numbers tied to your financial health – your credit score?

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“Thankfully, there are practical and emotional ways to break unhealthy debt cycles, improve your credit score and adopt positive money management habits with support from financial advisers and therapists.”

Ndimande says this is how different experiences influence our relationship with money:

Your formative years shape your money personality

According to Ndimande, these early observations and lessons shape how South Africans manage their finances well into adulthood. In the home, finances are not always an open topic, whether it is discussed with your partner or children to enable healthy spending and saving habits. Money talks should be encouraged.

Role of relationships and social influences in your credit score

Beyond family influence, Ndimande notes that as people grow older, their relationships and social circles also shape their financial behaviours. “Most people do not realise how relationships we have with a best friend or a romantic relationship influence our financial management.”

She adds that peer pressure is not just limited to children. It also pressures adults to keep up with their neighbours’ accomplishments. “This desire to maintain a specific lifestyle can lead to overspending and reliance on debt, potentially negatively affecting your credit score if not managed responsibly.”

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Careers can be positive turning points

Ndimande also reflects on how her early career at a bank reshaped her perspective on personal finance.

“Working in a face-to-face branch environment, I interacted with people applying for loans and saw thousands of bank statements and varying money behaviours. That experience taught me countless valuable money management lessons that I now live by, including avoiding debt traps and living within my means.”

She says eye-opening professional experiences can encourage South Africans to change their money behaviour, motivating them to adopt healthier money management practices. This positive shift in behaviour can, in turn, lead to an improved credit score over time.”

Breaking the debt cycle requires financial and emotional support

It can be challenging for South Africans who have grown up with family members in perpetual debt cycles to break free from those ingrained behaviours, Ndimande says. She advises them to enlist the help of a financial adviser who can provide objective insights and help them confront hard truths. She also recommends consulting a therapist for emotional money-related challenges.

“Some of these challenges need more than just a professional financial adviser. For example, someone’s family might guilt trip them for not contributing financially over the festive period, even if they cannot afford to. That is why South Africans sometimes require a professional financial adviser in one corner and a therapist in the other to deal with the emotional aspect.”

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Maintaining monthly budget

Ndimande emphasises the importance of budgeting as a fundamental tool for maintaining financial health.

“Creating a budget every month and sticking to it is crucial. It helps you track your spending, prioritise savings and avoid unnecessary debt. It is not just about numbers. It is about peace of mind and financial stability.”

Know your credit score and own it

A credit score reflects your financial behaviour, specifically how you manage your credit and debt, Ndimande says.

“Healthy financial habits, such as consistently paying your bills on time, keeping credit balances low and avoiding too many credit applications, generally lead to a higher score. Unhealthy behaviours, such as missing payments or maxing out credit cards can tank your score.”

She says the first step to improving your credit score is facing it head-on and working with a professional credit management partner.

“The ostrich mentality does not help. You want to know your score, understand what it means and how you got there. Consulting with a credit management coach can provide personalised guidance on the most impactful changes you should adopt.”

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“Your view of money, shaped by a lifetime of experiences and influences, is deeply intertwined with your credit health. You can take control of your credit story by understanding the psychological factors driving your financial behaviours, assessing your habits and seeking the professional support you need. Remember, there is always room to improve your score. It just takes one positive behaviour at a time.”