Increasing your credit score

C

carnagelan

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Hi Guys,

Say you have a R20 000 loan from a bank over 24 months and still have 18 months left for the loan.
If you have the spare money, is it better to pay the 18 months in full (one go) or pay monthly to increase your credit score?
 
RedViking said:
If the pay in full does nothing to the fixed interest, why not just pay it monthly and let the other amount gain interest in your savings account.
Click to expand...

Fixed interest just means it doesn't fluctuate with repo rate changes, repaying the capital WILL result in interest saving.

What OP wants to know is how will his credit score be impacted if OP settles it.
 
RedViking said:
If the pay in full does nothing to the fixed interest, why not just pay it monthly and let the other amount gain interest in your savings account.
Click to expand...
Imagine the interest someone who does not have a good credit record is paying on a personal loan and compare that to the measly interest on a savings account.

What interest rate did you get on the loan @carnagelan?
 
carnagelan said:
Hi Guys,

Say you have a R20 000 loan from a bank over 24 months and still have 18 months left for the loan.
If you have the spare money, is it better to pay the 18 months in full (one go) or pay monthly to increase your credit score?
Click to expand...

Personal loans are expensive.... even if you have a great credit score.

Why dont you use it on your credit card if you have one?
 
carnagelan said:
Hi Guys,

Say you have a R20 000 loan from a bank over 24 months and still have 18 months left for the loan.
If you have the spare money, is it better to pay the 18 months in full (one go) or pay monthly to increase your credit score?
Click to expand...

Kill it.

Credit score is only one thing in risk rules. Affordability is more important and personal loan payments are very high.

Let's say your income is R30K. This gives you an affordability of R10K per month. 1/3rd law.

If your personal loan is R2K, then you only have R8K left.

This hurts you when you apply for big loans with long term repayments like bonds.

R8K left would get you less than a million as you would also get a bad rate.

If you had R10K, then you could go as high as R1.2m with better interest rates.


Why most debts are bad for your credit risk.

For two years I worked in fintech developing systems that consume credit reports and scores. Majority of people don't understand how it works.
 
Sinbad said:
Settle it if you can. Settled loans reflect on your credit history positively.
Click to expand...
@carnagelan
What @Sinbad said.
In addition, there maybe savings in the form of an early settlement rebate. Just make very sure about the Ts and Cs of the loan first, some institutions may charge an early-settlement penalty. Call them to discuss.
 
Other Pineapple Smurf said:
Kill it.

Credit score is only one thing in risk rules. Affordability is more important and personal loan payments are very high.

Let's say your income is R30K. This gives you an affordability of R10K per month. 1/3rd law.

If your personal loan is R2K, then you only have R8K left.

This hurts you when you apply for big loans with long term repayments like bonds.

R8K left would get you less than a million as you would also get a bad rate.

If you had R10K, then you could go as high as R1.2m with better interest rates.


Why most debts are bad for your credit risk.

For two years I worked in fintech developing systems that consume credit reports and scores. Majority of people don't understand how it works.
Click to expand...
Credit score also looks at long term loans. The longer you have them (and keeping up with payments) . The higher the score.

(not an expert)

IMG_20220205_132906.jpg
 
carnagelan said:
Hi Guys,

Say you have a R20 000 loan from a bank over 24 months and still have 18 months left for the loan.
If you have the spare money, is it better to pay the 18 months in full (one go) or pay monthly to increase your credit score?
Click to expand...
"credit" "score".
 
RedViking said:
Credit score also looks at long term loans. The longer you have them (and keeping up with payments) . The higher the score.

(not an expert)

View attachment 1238844
Click to expand...
Good thing I have a revolving loan I never closed, it's chowing R57 every month but it has a lower interest than my credit card, I just thought I might find use for it at some point.
 
Thanks guy, i will give them a call on Monday and see if i can pay the full amount. I agree than personal loans are bad but it is something that needed to be done.
 
RonSwanson said:
@carnagelan
What @Sinbad said.
In addition, there maybe savings in the form of an early settlement rebate. Just make very sure about the Ts and Cs of the loan first, some institutions may charge an early-settlement penalty. Call them to discuss.
Click to expand...
Early settlement penalties only allowed on R250 000 and more.
 
It is good to have some sort of revolving loan that allows you quick cash if you need it.

Usually these personal loans/revolving loans have high interest rates, so if you have plenty of free cash, rather pay the loan off - but keep it open should you need emergency money in future.
 
RedViking said:
Credit score also looks at long term loans. The longer you have them (and keeping up with payments) . The higher the score.

(not an expert)

View attachment 1238844
Click to expand...

True. Lenders love long term loans as it shows that they can make more from you.

They hate it when people settle early as well. Some lenders will actually build this into their risk rules and negatively score such borrowers.
 
Always remember... credit scoring have 2 legs. What you see on credit bureau’s and internal banking (how you do banking)

You can have a great transunion or experian but have missed debit orders or unpaids!
 
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