How to increase your chance of being approved for credit: Capitec

A credit score is a simple way of showing whether a person knows how to manage their credit. It’s almost like a financial CV that gives credit providers information on how well you have, and currently are, managing your loans.

Having a good score will not only help credit providers approve your application but also get you the best rates, says Capitec.

The bank noted that a person’s credit score is calculated by looking at your past and current credit behaviour, which is listed in your credit report and available at credit bureaus.

Capitec said that the following factors affect your credit score in South Africa:

  • Your payment history –  Pay your accounts on time and in full. On-time payments show that you are trustworthy and willing to pay off your debt as agreed with the credit provider. Missed or partial payments will, however, have a negative effect on your credit score and will remain visible on your credit report even after you eventually manage to pay off your loan in full.
  • Your credit balances – Keep your credit balances low. Credit providers look at the total amount you owe (balance outstanding) compared to the original loan amount or credit limit. This is to see how much you have already repaid and how often you use credit (in the case of revolving credit).
  • Length of credit history –  The longer your credit history, the more information is available about you and the better the picture of your long-term credit behaviour.
  • New credit – Don’t open too many new credit accounts at the same time, as this could suggest that you are in financial trouble or that you’re trying to buy things you can’t afford.
  • Types of credit in use – Using a variety of credit products show that you are able to manage different types of credit. Instalment loans, such as personal loans, vehicle finance or home loans measure your ability to pay consistent monthly instalments because both the amount and the term are often fixed. Revolving credit, such as credit cards and store accounts measure how easy it is for you to manage your budget on a monthly basis, as payment requirements for these accounts vary based on how much was spent in a cycle

Calculating affordability

Credit providers must do an affordability calculation to see how much money you have left after you’ve paid your financial obligations and deducted your living expenses.

Capitec said South Africans can improve their affordability in the following ways:

  • Manage your income – Know what your monthly income is, how sustainable it is and whether it’s enough for all your financial obligations and monthly living expenses.
  • Reduce your expenses – Look at your money plan and decide where you can cut costs. This can include paying th lowest bank fees, closing accounts, reducing spend on non-essentail times, managing your monthly grocery budget, paying less for transport or joining a lift club.

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How to increase your chance of being approved for credit: Capitec