5 Benefits of Having High Credit Score In South Africa

We all think of having a good credit score at least once; why so? It’s because the higher the credit score, the easier it is to get the things we need or even desperately want to get into our lifestyles. Now, the first reason you stumbled across this article and decided to read it is because you’re unsure of the need for a good credit score.

We are here to tell you just that, to understand why a high credit score benefits you and your life in the long term, the first step we should take is to understand what a credit score is and how it impacts YOU. Okay, so in simple terms, a credit score is a 3-digit number that comes in the range of 300 to 900, with 300 being the lowest and 900 being the highest value. Now, you must be wondering how exactly it is determined, so let us tell you in the easiest and most articulate manner.

There are 4 major factors that determine your credit score:

• Firstly, your repayment history comes with it, i.e., the frequency of your payments and the timeliness that comes along with that.
• Next, we have the credit utilization ratio, the proportion between your monthly card usage and the approved credit card limit. A good way to achieve an acceptable credit ratio would be to limit your card usage to under 30% of the sanctioned limit.
• Your credit rating also depends on your credit age, which is essentially the history of how long you have been getting credit cards or taking loans; the longer it is, the better, as it makes the calculation process easier.
• Finally, we have the credit inquiries, which are the inquiries made by Fis for credit assessment; try to keep them as little as possible because too many inquiries within a short period can negatively impact your credit score.

Now that we have reviewed the credit score and the factors determining it lets discuss how keeping it high will be your golden goose.

 Better chances for loan approval or getting a credit card

How do you ask? Well, it’s simple: when banks and other financial institutions sanction loans, they first look for whether the individual can make timely repayments. As we discussed earlier, that is something that determines your credit score, so the better you are at making punctual payments, the higher your credit score, and the higher your credit score, the more likely you are to get your loan application approved.

 Lower interest rates on your credit cards and loans

Now banks and other FIs charge interest for the risk they undergo, divulging their money to borrowers, i.e. us, now if your credit utilization ratio is top-notch, i.e. if your spending habits and dependency on credit cards is lower than 30% of their sanctioned limits, that automatically relieves financial institutions of the risk factor since you’re less likely to be highly dependent on your loans to make bigger purchases. It is something that gives you a chance at having lesser interest rates on your credit cards as well as your loans.

 Higher negotiating power

Having a good credit score helps you have a good position while negotiating with financial institutions because, to them, you are a desirable borrower; on the other hand, if you were to have a lower credit score, your choices of getting loans would be limited and hence would be your power as a borrower. A higher credit score allows you to negotiate better interest rates, processing fees and so on with the banks.

 Better chances for approval of higher borrowing limits

The best way to achieve this is through a long and healthy credit age; the longer you’ve been punctually repaying your loans and spending less than the sanctioned limits, the more probable it is for you to forego the risk perception of banks and other financial institutions, hence landing you the approval for higher amounts of money since the risk that lenders face is reduced when it comes to you.

 Better car insurance rates

Last but not least, one of the lesser-known perks of a high credit score is getting car insurance at a lower premium. Since credit scores indicate the financial risk you pose to the insurance companies, insurance companies would grant you a lesser premium for a lesser risk to them.