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How to build a good credit record

Credit terminology

A credit record is a report on how well you have handled your loans in the past.

The history of how you managed your loans in the past is called your credit history.

If you qualify for a loan, you are creditworthy.

If you do not pay back the instalments and interest on a loan as you agreed with the creditor, you default.

A judgement is an order from the court, normally given after you have defaulted on a loan.

How to build a good credit history

Your credit record is going to influence the interest rate you'll be offered when you apply for a loan or a credit card. It is therefore important to build up a good credit history.

What does it mean?

A credit score is a numerical rating that is provided on a credit report. The credit score is based on the borrower's credit history. It measures the relative degree of risk that the borrower will be to the creditor.

The date on which you must make payment is called the due date.

The additional money the creditor will charge you when you pay your instalment late is called late fees and penalties.

A credit bureau is a company that collects and sells information about how people pay their loans. It issues credit reports that list how individuals manage their debts and make payments, how much credit they have available but have not used, and whether they have applied for any loans. The plural of a credit bureau is bureaux. It is a French word.

Sometimes a creditor requires something of value as guarantee or surety. The creditor can claim this valuable thing if you default on a loan. A life policy and a house are examples of valuable things that could be signed over as surety.

The following are important to build a good credit history:

check markEstablish a good credit record.

  • Open a credit account in your name and use it wisely.
  • Do not take out many store cards or open many accounts.
check markPay your monthly balance and your instalments on time.
  • If you miss the due date on a payment, pay the money as soon as possible. The late fees, interest penalties and negative effect on your credit score just gets worse as the payment becomes more overdue.
check markDo not run up debt on your credit card.
  • Keep well within the credit limit on your credit card.
check markDon't have too many accounts.
  • Opening new accounts you don't really need can lead to more debt.
  • Many accounts may lower your credit score.
  • If you have many cards, it is difficult for you to keep track of your spending and debt.
check markCheck your credit report regularly to make sure it is error-free.
  • Your credit report is available free of charge from the credit bureau once a year.
  • Protect yourself against identity theft

You can request a free copy of your report by contacting any one of the major Credit Bureaux:

Compuscan, Tel. 0861 514 131;
Experian, Tel. 086 110 5665;
Transunion, Tel. 0861 886 466 or 0861 482 482;
XDS, Tel: 011 645 9100;