Credit bureau TransUnion recently released data on how South Africans interacted with their credit scores. The survey revealed that just over half of South Africans have taken a much more proactive role in getting to know more about credit and this has been attributed to the turbulent economic climate we’re currently experiencing.
While this may be the case, TransUnion still reports that only about 37% of consumers actually know what their current credit score is.
“All of this data points to a persistent lack of understanding about credit, even among those who are trying to learn more,” said Garnet Jensen, Senior Director of TransUnion.
According to BusinessTech, TransUnion outlined some of the most common credit score myths that many people believed and offered some clarity on them.
Here are the top three myths:
‘Closing credit accounts will reflect positively on my credit score’
Some 58% of the participants in TransUnion’s survey said that they believed that closing their credit accounts would reflect positively on their credit score, but this is not necessarily true. According to TransUnion, in one instance the closure of the credit account may have almost no impact on your credit score at all, while in another instance – especially if you have an extensive credit history with the account you’re closing – it may have a negative impact on your credit score.
‘My dependents can have an impact on my credit score’
Exactly one in five of the respondents believed that having children or other dependants was something that reflected negatively on their credit score, but according to TransUnion, while many credit reports may reflect this information, it has no effect on the overall score of an individual. The only two factors that impact one’s credit score are a person’s financial habits and financial history.
READ MORE: 5 credit-smart hacks to crack
‘Opting to use my debit card instead of my credit card will reflect positively on my credit score’
More than half of the respondents believed that if they opted to rather use their debit cards instead of their credit cards, this would have somewhat of a positive impact on their credit score. This is completely untrue, and TransUnion further reiterates the point that using your debit card does not in anyway show how you are able to manage credit and thus won’t have any bearing on your credit score.
In a previous article in DESTINY MAN, Emma Mer, CEO of FNB Personal Loans, offered some very helpful tips on how one can become credit smart.
- Borrow from a trusted provider: Deals from credit providers can be enticing, but be very selective about where you borrow money. It’s safer to borrow from banks, as they are governed by strict industry rules.
- Do not over-extend yourself: This is where financial discipline becomes important. Avoid the temptation to borrow more than you require, as this could have a negative impact on your disposable income and your credit record if you are unable to repay.
- Choose a personal loan amount and repayment term that makes your instalment manageable: The term you choose to repay your personal loan is important, as it directly impacts your monthly instalment. Make sure you can afford your repayments. Should you be able to pay off your personal loan early, FNB will not charge you any penalties.
- Pay on time: Paying your personal loan instalments on time is important in order to keep a good credit record, which determines your ability to get credit in future.
- Pay by debit order: Paying via a debit order is one of the easiest, most reliable and cost-effective ways to meet your repayment obligations.
Additional source: BusinessTech