Tips on how to shape your credit score

South African youth may find building a health credit score difficult while the country’s economy struggles.

However, maintaining a strong credit report is more critical than ever, not just for accessing loans but for shaping employment prospects and long-term financial security.

Lerato Thwane, Head of E-Commerce at XDS, a division of Mettus, says that as possible tax hikes and rising living costs are on the horizon, financial resilience will depend on strategic money management.

“Understanding and strengthening one’s credit score has become a key pillar of financial stability and future opportunities in an unpredictable economy.”

How credit scores shape your life

She says financial institutions have primarily used credit scores to evaluate an individual’s creditworthiness for loans, mortgages and credit cards.

“A high credit score typically results in more favourable interest rates and loan terms, leading to potential long-term savings.

“In contrast, a lower score can lead to higher borrowing costs or even loan denials.”

However, the scope of credit score applications has expanded in recent years.

Landlords may assess a prospective tenant’s credit history to gauge their financial reliability, while utility companies might use credit scores to determine deposit requirements.

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Insurance providers also consider credit scores when calculating premiums, as they may view individuals with lower scores as higher-risk policyholders.

“Additionally, employers – particularly those in industries such as finance and management – are increasingly incorporating credit checks into hiring decisions.

“This practice is based on the belief that financial responsibility indicates an individual’s reliability, integrity, and decision-making ability.”

Big purchases start with good credit

Thwane adds that a strong credit score remains essential for big purchases.

This includes buying a property, a vehicle or applying for finance.

“Lenders will assess your credit report to determine the risk associated with financing.

“Individuals with higher credit scores are often rewarded with lower interest rates, which reduces the total cost of the purchase over time.”

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She emphasises the importance of staying current with fiscal policies that may influence lending practices and interest rates.

Knowing these will help people make strategic and informed decisions.

Credit scores and employment

Thwane says credit checks have become common in employment screenings.

“Employers contend that financial stability reflects a candidate’s reliability and integrity, especially for roles involving cash handling, company finances, or access to confidential information.

“A negative credit history may raise doubts about an individual’s ability to fulfil responsibilities or avoid financial pressures, potentially affecting their job opportunities.

“Additionally, employers may view significant financial distress as a potential conflict of interest, increasing the risk of fraud, bribery, or unethical decision-making in the workplace.”

Five steps to enhance your credit score

She says improving and maintaining a healthy credit score requires deliberate effort and consistent financial habits.

Here are steps to guide you:

Timely payments: It is fundamental to pay bills on time consistently. Late payments can significantly impact your credit rating. Setting up automatic payments or reminders can help ensure punctuality.

Manage credit utilisation: Aim to use a modest portion of your available credit. High utilisation rates can signal financial distress and negatively affect your score.

Regular credit report monitoring: Frequently review your credit report to identify and dispute inaccuracies. In South Africa, consumers are entitled to one free credit report annually from each major credit bureau.

Diversify credit types: Having a mix of credit accounts, such as credit cards, personal loans and retail accounts, can positively influence your credit score, provided they are managed responsibly.

Consider credit-building tools: Using products designed to help build or rebuild credit can be beneficial. These may include secured credit cards or credit-builder loans.

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