How do people get bad credit ratings?

If you’re reading this, you may be one of millions of South Africans who have had a credit application rejected because of their low credit score.

Having bad credit means that it will be difficult to apply for a credit card, home loan, or vehicle financing – but how do people get bad credit ratings in the first place?

Why is my credit score so bad?

If you ask most people what their credit score is, there’s an excellent chance that they won’t know. All South Africans are entitled to one free credit score report per year, yet most of us have never even requested one. We usually find out that our credit ratings are bad when we try to apply for credit – and by then it’s too late.

Your credit score is a reflection of how well you behave as a credit consumer. In other words, it tells creditors how likely you are to repay your debts.

Your bank, credit card provider, and any retailers you may have accounts with report your payment behaviour to the major credit bureaus on a regular basis. Because of this, any of the following slip-ups can cause you to have a bad credit rating:

  • Late payments on your credit card
  • Skipped payments on your retail accounts
  • Paying less than the minimum amount due
  • Undergoing debt counselling
  • Credit judgements

While late payments and the occasional skipped payment may not make a huge dent in your credit rating, judgements are a totally different matter. Generally speaking, if you have judgements against your name you are likely to be blacklisted until you settle the amount that is owed.

What can I do about my poor credit rating?

There are so many valid and justified reasons for missing a payment – including financial difficulties, unexpected expenses or losing your job. Unfortunately, not being able to pay your creditors doesn’t mean that you don’t owe them the amount you borrowed.

If you’d like to improve your credit score, you will need to settle all your outstanding debts and send proof of payment to the credit bureaus – an attorney can also assist you with this. If your low credit score comes from skipped payments, you will need to make every payment on time for at least 24 months before your rating recovers.

Does this mean I can’t buy a car?

Fortunately, there is a great new way to buy a vehicle called rent to buy. If you’d like to skip the credit checks and denied applications and get back on the road, get in touch with us today. Our team looks forward to answering any questions you may have.