Having a good credit score is an important tool for tenants as it allows them to negotiate favourable lease terms and secure quality properties.
This is according to Landsdowne Property Group.
Along with aiding tenants, a good credit score can also pave the way for future financial opportunities, such as home or personal loans.
What is credit score and how was it calculated?
According to Glenda Eager, Product and Marketing Executive, RCS, credit score is a figure that represents a person’s creditworthiness, based on their credit history.
Lenders will use this score to decide if they will give a person credit and at what interest rate.
In South Africa, a credit score is calculated by a credit bureau based on a person’s credit report.
The credit bureau will look at a number of factors including:
– how much a person earns
– how much debt the person has
– how a person’s credit report compares to other consumers that make use of credit.
Jonathan Kohler, founder and CEO, Landsdowne said that without a credit history, it can be difficult to secure home loans and rental properties, as creditors cannot assess payment history and affordability.
Landlords and rental agents will evaluate potential tenants by focusing on monthly income (salary after taxes) to determine affordability. They will rely on credit bureaus like TransUnion to conduct the credit checks.
According to TransUnion, a credit score is categorised as favourable (614-680), good (681-766), or excellent (767-999), with higher scores indicating better creditworthiness while a poor or below-average score signals the need for improvement.
Rynhardt de Lange, director and head of legal at Milaw Legal said that there a number of factors that are cause people to have low credit score.
These are the reasons for people having low credit scores: they are new to the credit market, they have high credit card balances, they have missed payment dates, they have new credit applications and they credit portfolio that lacks diversity.
Here are five ways to build and enhance credit.
Pay bills on time
Timely payments are essential for improving your credit rating, as late payments can stay on your credit report for up to five years. If you miss a payment, ensure that the balance is paid up as soon as possible.
Pay more than the minimum
Paying more than the minimum will reduce the total interest paid and also allow you to pay off your debts faster which will lower your monthly expenses.
Reduce debt
High debt levels will have a negative impact your credit score therefore you should try to pay off and close some accounts or credit cards. If possible consolidate them to just one or two.
Limit new credit requests
Improve or build your credit rating by not taking on extra debt like new personal loans or credit cards.
Check your credit report regularly
Monitoring your credit report will allow you to tracking progress and identify areas for improvement which in turn can help you to boost your credit score over time.
IOL Property
