Question about a building a credit score.

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AdamGamerX

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So I'm thinking of building a good credit score and I'm not sure which is the way to go. Let's say I want to get a new tv while helping my credit score.
Should I get It on store credit e.g a 10k tv at HiFi Corp will end up costing me 20K with 36 months payments.
Or
A bank loan where a rough calculation from standard bank where a 10K with R1150pm for 12 months and whatever imitation fee they charge will cost me around 15K.
Or
Should I get a credit card?
 
To be honest if you cannot pay that tv cash you cannot afford it, buying items like this is not the way to go at all it sets you down a very dangerous path. Credit cards if used responsibly in other words pay off every month everything not the minimum is the best.

My credit card interest rate is 7 odd percent and I dont pay a cent interest or buy anything on debt I rather wait a few months to buy something.

And please dont use the excuse of paying for a tv with debt as a good reason to build a credit score

Hard truth but dont do it.
 
@AdamGamerX
So - there are a number of ways to go around this and @Snyper564 is right. Imo though there are degrees to this.

So I have a credit card - and I use it based on 1 golden rule:

Do not use more than you can immediately settle

For instance, if you have a credit card with an available limit of R30 000 and you use all of it, but you only have R15 000 worth of savings, you are going to owe R15 000 and have no way to settle it without working it off, and then you have to take into account interest. So dont buy something you cant immediately settle.

1. Open a cheque account - this helps towards showing your daily transactions and can contribute to positive credit. A transaction savings account is not the same - it must be cheque.
2. DO NOT TAKE ANY PAYDAY LOANS (Wonga etc) This will NEGATIVELY affect your credit rating.
3. Clothing Accounts - if you have never had credit before - this is where you start. You open up a clothing account, buy R1000 worth of clothing, pay it off over 3 months - at consistent steady intervals.
4. If you have any monthly costs i.e. Insurance, clothing accounts you pay off, a cellphone contract, etc etc pay them on time, consistently.
5. Do not take a loan JUST to start your credit score - particularly in times like we are now with a recession looming.

Things that will negatively affect your credit rating:
1. Applying for too much credit. Every time you apply for credit (be it a clothing account, car financing, a bond, a credit card, a payday loan, buying something on hire purchase) a credit check will be done on every application, and every credit check that is done will NEGATIVELY affect your credit score. It happens to everyone. And takes about 24 months to fall away.
2. Missing a payment or a monthly repayment.
3. Using more than 50% of your available credit will harm yoru credit rating. i.e. if you have R30 000 available credit and you use more than 15k.
4. Relying on Credit too much - if your debt consistently grows (i.e. you use credit to make up for a shortfall in your income) and your debt starts to grow - it will negatively impact yoru score.


My advice to you. If you have never had credit or have never had a credit account / card / no cheque account / no insurance etc etc.

Start with a clothing account, Edgars gave me my first clothing despite me having no credit history. My buy limit was R8000. I bought R2000 worth of clothing, paid it off over 3 months. Then I applied for a credit card, I got a credit card with a limit of R5000.00. I used it for small things like a pc part and paid it off in 3 months, and some cloths and paid it off in 2 months. Showing them that I could take credit, pay it off consistently and they gradually increased my credit limit.

But at every point I never broke the golden rule.

Banks want to see consistent, faultless repayments to build trust.
 
Last edited:
Deago999 said:
@AdamGamerX
So - there are a number of ways to go around and @Snyper564 is right. Imo though there are degrees to this.

So I have a credit card - and I use it based on 1 golden rule:

Do not use more than you can immediately settle

For instance, if you have a credit card with an available limit of R30 000 and you use all of it, but you only have R15 000 worth of savings, you are going to owe R15 000 and have no way to settle it without working it off, and then you have to take into account interest. So dont buy something you cant immediately settle.

1. Open a cheque account - this helps towards showing your daily transactions and can contribute to positive credit. A transaction savings account is not the same - it must be cheque.
2. DO NOT TAKE ANY PAYDAY LOANS (Wonga etc) This will NEGATIVELY affect your credit rating.
3. Clothing Accounts - if you have never had credit before - this is where you start. You open up a clothing account, buy R1000 worth of clothing, pay it off over 3 months - at consistent steady intervals.
4. If you have any monthly costs i.e. Insurance, clothing accounts you pay off, a cellphone contract, etc etc pay them on time, consistently.
5. Do not take a loan JUST to start your credit score - particularly in times like we are now with a recession looming.

Things that will negatively affect your credit rating:
1. Applying for too much credit. Every time you apply for credit (be it a clothing account, car financing, a bond, a credit card, a payday loan, buying something on hire purchase) a credit check will be done on every application, and every credit check that is done will NEGATIVELY affect your credit score. It happens to everyone. And takes about 24 months to fall away.
2. Missing a payment or a monthly repayment.
3. Using more than 50% of your available credit will harm yoru credit rating. i.e. if you have R30 000 available credit and you use more than 15k.
4. Relying on Credit too much - if your debt consistently grows (i.e. you use credit to make up for a shortfall in your income) and your debt starts to grow - it will negatively impact yoru score.


My advice to you. If you have never had credit or have never had a credit account / card / no cheque account / no insurance etc etc.

Start with a clothing account, Edgars gave me my first clothing despite me having no credit history. My buy limit was R8000. I bought R2000 worth of clothing, paid it off over 3 months. Then I applied for a credit card, I got a credit card with a limit of R5000.00. I used it for small things like a pc part and paid it off in 3 months, and some cloths and paid it off in 2 months. Showing them that I could take credit, pay it off consistently and they gradually increased my credit limit.

But at every point I never broke the golden rule.

Banks want to see consistent, faultless repayments to build trust.
Click to expand...

Have heard conflicting reports about too many credit checks affecting your credit record - some people at work (a financial services provider) reckon this is untrue.

Also, I've never been negatively affected by using more than 50% of my credit. Often maxed it out when I was younger - and it wasn't a small amount. My credit rating has always been very good regardless. However - I always paid at least the minimum payable amount every month.

Anyway, don't take these as suggestions, OP, just thought I'd provide my experience.

What does also influence your credit record negatively is having too big a credit limit and most of it is unused. This is seen as risky because the potential is there to incur a large amount of debit virtually instantly.

Bottom line - don't get that TV. Get a credit card with a manageable limit. This was how I built my credit record, together with something like a cheap cellphone contract, for example.

Payment history is what it's all about.
 
Superman-7 said:
Have heard conflicting reports about too many credit checks affecting your credit record - some people at work (a financial services provider) reckon this is untrue.
Click to expand...

The company I worked for was a credit bureau as we used credit information from the main bureaus.

Soft checks don't count against it. Soft checks occur for back screening and things like that.

When applying for credit though, a hard check is done. A few of these in a short period counts against you as it seems you are desperate for credit.
 
Well, my route was I qualified for a credit card straight up due to income (with 2 months statements, didn't reach 3 at the time yet), did it more due to the zero liability benefit rather than credit score, but just the card (while having literally no credit history whatsoever) got me to 618. You can check your score for free on Tymecoach, they're part of Tymebank which is has a thread here (which also talks about their 9% interest rate savings account). I like the site mostly because they promise to send an alert if my score changes, so east to check if e.g. fraud is happening.

I am not interested in building more history though, would actually like to see how e.g. opening a Woolworths clothing account impacts it.
 
Superman-7 said:
Have heard conflicting reports about too many credit checks affecting your credit record - some people at work (a financial services provider) reckon this is untrue.

Also, I've never been negatively affected by using more than 50% of my credit. Often maxed it out when I was younger - and it wasn't a small amount. My credit rating has always been very good regardless. However - I always paid at least the minimum payable amount every month.

Anyway, don't take these as suggestions, OP, just thought I'd provide my experience.

What does also influence your credit record negatively is having too big a credit limit and most of it is unused. This is seen as risky because the potential is there to incur a large amount of debit virtually instantly.

Bottom line - don't get that TV. Get a credit card with a manageable limit. This was how I built my credit record, together with something like a cheap cellphone contract, for example.

Payment history is what it's all about.
Click to expand...

Yeah credit usage is definitely a factor. FNB has its own credit checker - and they list certain criteria that you are doing well in or badly in - example below:

bvc.PNG

This dropped for me when I got my car financed.

So % usage is definitely a factor.

Further supported:
If I have a lot of debt, will my credit score will be bad?

That depends, if you have a lot of debt, but you are managing it well, you will have a good credit score! Your repayment history affects your free credit score and appears on your credit report. Meaning, if you have been a bad payer, your score will reflect this. The total amount of your credit does not usually affect the outcome of your credit score, since your credit score is mostly calculated according to your repayment actions and not necessarily by the amount you owe. Just be aware that if your revolving accounts and credit cards have a balance of 50% or more of the limit, the score will be affected.

Free Credit Report and Free Credit Score | Compuscan - South Africa

Understanding your free credit report and free credit report from South African credit bureau, Compuscan, is your first step to managing your finances.
compuscan.co.za compuscan.co.za
 
Deago999 said:
Yeah credit usage is definitely a factor. FNB has its own credit checker - and they list certain criteria that you are doing well in or badly in - example below:

View attachment 834416

This dropped for me when I got my car financed.

So % usage is definitely a factor.

Further supported:
If I have a lot of debt, will my credit score will be bad?

That depends, if you have a lot of debt, but you are managing it well, you will have a good credit score! Your repayment history affects your free credit score and appears on your credit report. Meaning, if you have been a bad payer, your score will reflect this. The total amount of your credit does not usually affect the outcome of your credit score, since your credit score is mostly calculated according to your repayment actions and not necessarily by the amount you owe. Just be aware that if your revolving accounts and credit cards have a balance of 50% or more of the limit, the score will be affected.

Free Credit Report and Free Credit Score | Compuscan - South Africa

Understanding your free credit report and free credit report from South African credit bureau, Compuscan, is your first step to managing your finances.
compuscan.co.za compuscan.co.za
Click to expand...

Fair - not my experience with ABSA though. Either other aspects of my credit activity was keeping the score up, or it's less applicable for 'established' clients. Neither here nor there though.
 
Johnatan56 said:
Well, my route was I qualified for a credit card straight up due to income (with 2 months statements, didn't reach 3 at the time yet), did it more due to the zero liability benefit rather than credit score, but just the card (while having literally no credit history whatsoever) got me to 618. You can check your score for free on Tymecoach, they're part of Tymebank which is has a thread here (which also talks about their 9% interest rate savings account). I like the site mostly because they promise to send an alert if my score changes, so east to check if e.g. fraud is happening.

I am not interested in building more history though, would actually like to see how e.g. opening a Woolworths clothing account impacts it.
Click to expand...
TymeCoach suck. I'm more responsible than they think. :D
 
Building a credit score was just a passing thought though. I figured I should do it just it case, although I can afford to buy most things cash. I guess I'll just stick to buying cash.
 
Servicing debt facilities timeously and without incident is what contributes to a good credit score. Buying and settling your credit card or debt facility in full every month is not as effective. The advantage to a good credit score is obvious, access to credit at lower interest rates so that when you are forced to use credit to purchase a home or vehicle that you benefit from a preferential rate and the savings are considerable.
 
A credit card is something that can be used to build a positive score. Buy everything on the CC, but pay it off before it is due. I settle my card every week if I have used it. I don't buy stuff that I don't have the cash for. So rather than using my debit card, or , worst thing ever, draw cash, I use the credit card. I'm talking buying a loaf of bread to doing the monthly grocery shopping. EVERYTHING goes on my card.

Also never only pay the minimum amount on a credit card if you are carrying credit card debt. Your score goes up if you show that you are paying more every month that what is required.
 
Dairyfarmer said:
A credit card is something that can be used to build a positive score. Buy everything on the CC, but pay it off before it is due. I settle my card every week if I have used it. I don't buy stuff that I don't have the cash for. So rather than using my debit card, or , worst thing ever, draw cash, I use the credit card. I'm talking buying a loaf of bread to doing the monthly grocery shopping. EVERYTHING goes on my card.

Also never only pay the minimum amount on a credit card if you are carrying credit card debt. Your score goes up if you show that you are paying more every month that what is required.
Click to expand...

The only importance is to service your debt accordingly - paying everything off or more than the minimum payment doesn’t make much of a difference in fact some might argue that banks prefer those who are responsible long term lenders than short term lenders.
 
quovadis said:
The only importance is to service your debt accordingly - paying everything off or more than the minimum payment doesn’t make much of a difference in fact some might argue that banks prefer those who are responsible long term lenders than short term lenders.
Click to expand...
It's is not the bank that sets the credit score. They may offer better rates and higher amounts to long term customers. The credit score works on how extended you are and how you handle your debt. If you can show that you are able to pay more than what is required, they up the score. Those that pay the minimum every time show that they are at their limit and any further credit could be a risk. So they will keep your score as it is.

The same for people with very little debt or no debt. You have a limited proof of handling debt. That is why buying on a credit card or store card is better than paying cash or debit card. Even though you incur no fees or interest, you show that you can pay off the debt you accumulate. The only cost is the yearly card fee. A small price to pay for a credit score. I saw my score drop from a 98 to a 80 six months after settling a car finance because i carried no long term debt. A 2 years later I bought a new car, got the finance and my score rose back into the 90's after a few payments. A year later I settled the debt and i dropped again.

Lenders can only financially penalise you for very short term settlement of long term debt. Like a car finance settled within 3 months attracts charges.
 
Dairyfarmer said:
It's is not the bank that sets the credit score. They may offer better rates and higher amounts to long term customers. The credit score works on how extended you are and how you handle your debt. If you can show that you are able to pay more than what is required, they up the score. Those that pay the minimum every time show that they are at their limit and any further credit could be a risk. So they will keep your score as it is.

The same for people with very little debt or no debt. You have a limited proof of handling debt. That is why buying on a credit card or store card is better than paying cash or debit card. Even though you incur no fees or interest, you show that you can pay off the debt you accumulate. The only cost is the yearly card fee. A small price to pay for a credit score. I saw my score drop from a 98 to a 80 six months after settling a car finance because i carried no long term debt. A 2 years later I bought a new car, got the finance and my score rose back into the 90's after a few payments. A year later I settled the debt and i dropped again.

Lenders can only financially penalise you for very short term settlement of long term debt. Like a car finance settled within 3 months attracts charges.
Click to expand...

I agree with you regarding long term customers however the credit score is based on what is reported to the bureaus by the financial institutions and you will generally receive similar offers from the institutions based on it regardless of being a new or long term customer. I disagree though with your assertion that paying the minimum is more of a risk or indicates that lenders are at their limit. I base this on my personal experience vs colleagues and friends. If I, as a youngster, for years serviced plenty of debt for whatever reasons paying the minimum. The result is that I now benefit from extremely low interest rates on all my debt facilities with my home loan and vehicle finance at below bank staff rate and credit card at bank staff rates. My wife always balks when we get comparative quotes from each other's financial institutions (or if I apply at her financial institution and get a better rate) as she has the same philosophy as yours and arguably more stable and much larger income than myself at times. Obviously there are pros and cons for all approaches but there is no negative to paying the minimum besides the interest accrued.
 
Get a credit card and only use it when you have the cash equal to the amount you going to use on it.Clothing store account also helps
 
We Love Bass said:
Get a credit card and only use it when you have the cash equal to the amount you going to use on it.Clothing store account also helps
Click to expand...
Yup it's the fastest way to boost your credit score especially if you pay it off early
 
Polymathic said:
Yup it's the fastest way to boost your credit score especially if you pay it off early
Click to expand...

Yep especially for kids still in High School, when you start building the score from there you will hardly get declined anywhere when you try applying for credit/contract after matric.
 
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