Why maintaining a good credit score matters

A good credit score opens financial doors and paves the way for acquiring assets you may otherwise struggle to access. 

Dee Chetty, chief product officer at TransUnion South Africa, explains how to maintain a good credit score through responsible financial behaviour.

Tip: The way you manage credit affects your financial health. Check your credit score to assess your current standing.

Why do you need a good credit score?

Think of your credit history as your financial report card. “It provides lenders with insights into your financial habits, which helps to determine your creditworthiness,” Chetty explains.

“A robust credit history provides you with access to financial opportunities – such as securing a home loan, financing your education, or even starting a business – and can help to reduce your living costs,” he explains.

“As the cost of living escalates, using credit responsibly can act as a strategic tool,” he points out. “For example, you can negotiate better terms on loans, or secure an increased credit limit.”

How to improve your credit score

It may seem daunting, but improving your credit score is all about consistency and discipline.

Chetty recommends four strategies:

1. Make timely payments. “Your payment history makes up a significant portion of your credit score, reflecting your reliability,” Chetty says. "Setting up automatic payments or reminders can help foster discipline."
2. Have a diverse credit portfolio. This can bolster your creditworthiness as it shows you can manage different types of loans responsibly. “Consider a mix of credit cards, retail accounts, and instalment loans – but exercise caution and ensure you can manage these accounts responsibly,” says Chetty.
3. Monitor your credit report. Regularly monitoring your credit report enables you to identify any discrepancies, unauthorised transactions, or potentially fraudulent activities on your accounts.
4. Limit your credit use. Aim to keep your credit utilisation rate, or the amount of available credit you’re using, below 30%, Chetty says. This demonstrates restraint and responsible financial behaviour. It also safeguards your credit score and mitigates risks associated with accumulating high-interest debt.

Tips to improve your overall financial health 

A good credit score is just one aspect of financial wellbeing. Chetty outlines some tips to improve your overall financial health.

1. Budget and plan. A comprehensive budget tailored to your income and expenses lays the foundation for financial stability. “Embrace tools and apps that facilitate [budgeting], allowing you to track expenses, identify potential savings, and prioritise essentials,” advises Chetty.
2. Enhance your financial literacy. Seek out financial literacy initiatives, such as online resources or workshops. Understanding financial concepts, products, and regulations allows you to better navigate the intricacies of the financial landscape.
3. Save for a rainy day. Whether you’re establishing an emergency fund, exploring investment opportunities, or leveraging tax-free savings accounts, prioritising saving as a strategic tool will buffer you against unforeseen expenses.

Tip: Learn about saving and investing as a means of securing your financial future.