The importance of keeping a clean credit record

Most people know that the way they manage their credit is tracked, but don’t realise the role a credit record will play in their future financial wellbeing.

“A credit record is the documentation detailing payment history of current and previous debt,” says Nico van Staden, Head of Credit at First National Bank(FNB) Credit Card. “Credit providers, including banks, retailers and personal loan companies are required by law to submit information on your credit repayments to the credit bureaus,” adds van Staden.

Details such as frequency of payments, any missed payments, overdue accounts or judgements against you are also reflected in your profile. The information on your credit record is used by service providers to assess your affordability and risk profile. Any missed payments reflect on your credit profile.

For example, if you miss payment and catch up the following month, the missed payment will be recorded at the bureau and stored for 24 months. The bureau record will show that you are up to date but missed payment the previous month.

What to do if you have a poor credit record

Firstly, try to catch up on any payments where you are in arrears. This will mean changing your spending habits in order to achieve the end goal.

“Speak to your bank or credit provider if you are not managing, they may be able to help restructure your repayments,” says van Staden.

Once you have caught up on your arrears, you will need to start paying back the short term credit facilities that you have such as credit card, store cards or personal loans. Start with the loan with the highest interest rate and do not be tempted to take out more credit once that loan has been paid off. This will show credit providers that you are willing to pay back loans.

“Cleaning up your credit record is a long process, it can take up to two years before your record is clean again,” concludes van Staden.

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