Few people can get through life without the need to access credit. Used wisely, it can build your wealth and enhance your lifestyle. The process of applying for a loan is relatively easy, but you have to ensure that you have all the elements in place to qualify.
When you apply for a loan, the bank assesses your credit worthiness by doing a number of checks. The bank doesn’t only look at how much you earn; your spending habits and behaviour have a big impact on your credit profile, too.
Theunis Kruger, Head of Unsecured Lending at Standard Bank suggests the following tips to build a good credit record and keep the payments affordable:
- If you have accounts that are paid but still open, close them. The bank will see them as a line of credit.
- Examine the purpose of the loan carefully. Using a loan for studying is a good reason as it would improve your future earnings potential. Similarly using a loan to fund home improvements will increase the value of the house. Using a loan to pay for groceries however, is not a good idea as the debt repayment will last long after the groceries have been consumed.
- Always pay bills on time. Even late payments are recorded at the credit bureau.
- Make sure your details are up to date at the bureau.
- Protect yourself against identity fraud. Get a copy of your report each year to ensure that someone is not using your details to get credit.
If you are declined for a loan, ask the consultant why. This will enable you to identify what you need to change to qualify for credit in future.
“Banks have to comply with the National Credit Regulator (NCR) rules of responsible lending; if you get a loan that you can’t afford to repay, it may result in you being over-indebted. If you manage your debt responsibly, you will always have access to credit when you need it the most,” concludes Mr Kruger.