Building a strong credit scoreis crucial for achieving financial wellness. It unlocks access to better loan options at lower interest rates, opening doors to various financial opportunities. However, making certain credit mistakes can negatively impact your credit score and hinder your financial progress. In this blog, FASTA explores 5 common credit mistakes and provides actionable tips on how to avoid them.
Missing Loan or Credit Card Repayments
Mistake:Skipping or making late repayments onloans or creditcards is the most detrimental mistake you can make for your credit score.
Impact:Late payments are reported to credit bureaus inSouth Africaand can significantly decrease your score. These late payments stay on yourcreditreport for up to two years (in some instances, longer).
Avoidance:Set up debit orders to ensure you never miss a due date. If facing financial difficulties, contact yourcredit provideras soon as possible to discuss options and avoid late payment penalties.FASTAoffers flexible repayment options to help youmanage your debt responsibly.
Maxing Out Your Credit Limits
Mistake:Utilising a significant portion (ideally below 30%) of your available credit limit can negatively impact yourcredit utilisation ratio, a crucial factor in determining your credit score.
Impact:Maxing out yourcredit cardsshows credit providers that you’re heavily reliant on credit and might struggle to manage debt, potentially lowering your score.
Avoidance:Develop a budgetand track your spending to avoid overspending. Aim to keep yourcredit utilisation ratio lowby using only a portion of your available credit limit and paying down balances regularly. Consider using abudgetingapp or spreadsheet to stay on top of your finances.
Applying for Too Much Credit at Once
Mistake:Submitting multiple credit card or loan applications within a short time period can trigger numeroushard inquirieson your credit report. This will impact your score.
Impact:Each hard inquiry can slightly lower yourcredit score. Having several inquiries clustered together can raise red flags for lenders, suggesting that you’re seeking additionalcredit due to financialstrain.
Avoidance:Space out creditapplications and only apply for loansor credit cards you genuinely need. Consider alternative financing options before applying for newcredit. Explore the variousloan options available at FASTAto find the best fit for your needs, without applying for multiple loans at once.
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Not Using Credit Wisely
Mistake:Failing to establish a credit history or notusing credit responsibly can limit your access to future loansfor credit products.
Impact:Creditproviders prefer borrowerswith a proven track record of managing credit responsibly. Without a credit history, it can be challenging to obtainfinancing. Even smallcreditmistakes can have a significant impact on those with limited credit experience.
Avoidance:If you have no credit history, consider applying for a startercredit cardwith a low limit and use it responsibly. Pay your balance in full each month to demonstrate responsiblecredit management. FASTA canguide you through the process of building a positive credithistory.
Ignoring Errors on Your Credit Report
Mistake:Failing to review yourcreditreport regularly and neglecting to address any errors can lead to inaccurate information impacting your credit score.
Impact:Inaccurate information on yourcreditreport, such as late payments you didn’t make, can significantly lower your score.
Avoidance:Obtain your free credit report from authorised credit bureaus inSouth Africa, at least once a year, and carefully review it for any errors. If you find discrepancies, dispute them directly with thecreditbureau and the credit provider who reported the information. You can also use online websites tocheck your credit report for free.
FASTA: Your Partner in Building Financial Wellness
FASTA recognises the importance of financial literacy andbuilding a strong credit scorefor overall financial wellbeing. We offer a variety of responsibleloanoptions to help you meet your financial goals. We also believe in empowering our customers with the knowledge and tools to make informed financial decisions. Beyondloans, FASTA provides valuable resources and educational content on our website to support your financial journey. Explore our resources to learn more aboutbuilding a strong creditscore and achieving financial wellness.
Remember: Building a goodcredit scoretakes time and consistent effort. By avoiding these common mistakes and adopting healthy credit habits, you can pave the way for a brighterfinancial future. FASTA is here to support you on your journey towardsfinancial wellness.
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