Credit scores – a term within the financial world that might sound complicated to understand but plays an important role when it’s time to make a major purchase (like buying a home) or taking out a personal loan for unexpected expenses.
Your credit score is a three-digit number, and it is what lenders use to determine if you should get some form of credit and the interest rate that you are charged. Ranging from 300 to 850, everyone has their own credit score and the higher your score, the better your chances are of receiving credit from a lender, as well as increasing your chances of getting better terms for your credit.
So how does your credit score impact your financial future? Read this post for more.
Your credit score impacts your application outcome for credit
Each time you apply for credit, an enquiry is made on your credit report. While applying for credit every now and then won’t heavily impact your credit application, every time you do apply for credit, a hard inquiry is made. This means that the lender you applied from will pull your credit report from a credit bureau.
These hard inquiries can impact your credit score so to avoid a negative impact on your score, try not to make numerous credit applications in a short amount of time. To minimise the amount of inquiries on your credit report, and in turn, better your chances of getting a positive outcome when you do apply for credit, read through any criteria that is mentioned when making your application. If, for example, you need to have a certain credit score in order to apply for a credit card, and you aren’t sure what your score is, visit our partner ClearScore, to get a credit score. Or read our blog post on How to Check Your Credit Score for Free.
Alternatively, you can also look for pre approval forms on certain credit products to see what your chances are of qualifying for credit. This is known as a soft inquiry and won’t impact your credit score at all.
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Your payment history is important
A track record of when you repay your debt impacts your credit score and can either help or hinder your financial future. Lenders want to ensure that they lend to people who are reliable, responsible, and able to repay on time. From payments on credit cards, store accounts and instalments on loans, these are just a few ways that lenders will look into your payment history and determine if you qualify to receive credit or not.
Your credit history is also important
If you have never taken out credit, there is a high chance that your credit score is low and your ability to apply for credit in future is limited. This is because lenders will have very little information about your ability to borrow money and repay it, and this might make you a high risk individual in terms of lending you credit.
Getting approved for credit will be unlikely if you don’t have a credit history, but of course, you need credit in order to build your credit history. In this case, a responsible lender like a FASTA can be a great way to start building your credit history. Because you can get up to R8000, and with repayment terms of up to 3 months, FASTA can help establish your credit history and show how reliable and responsible you are with credit.
A good credit score today for a better financial future
If you can manage your credit well, and work towards having a high credit score, this will have a positive effect on your financial future. Make smart financial decisions by paying your debt on time, making those credit score inquiries when necessary, and improving your credit history so you can enjoy a better financial future.
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