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How to improve your credit record before applying for a bond
Start by getting your credit report and reading it line by line. Then pay everything on time, bring down your balances and correct any mistakes. Do this at least a few months before you apply for a bond, because a credit record improves slowly and errors take time to fix.
Get your credit report
A credit report is a record kept by a credit bureau of the accounts you hold, how you pay them and any problems such as defaults or judgments. Lenders use it, together with your income and debts, to decide whether to lend to you and on what terms.
You have a legal right to see it. Under the National Credit Act, you can get a free report once a year. You can ask each credit bureau for one. Several bureaus operate in South Africa, so request a report from more than one, as they sometimes hold different information. Beware of services that charge for something you can get free.
When you read the report, check:
- that your name, ID number and address are correct;
- that every account listed is yours;
- that balances, limits and payment histories match your own records;
- that closed accounts and settled debts are shown as such;
- whether any judgments or defaults are listed, and whether you recognise them.
Dispute errors
You are entitled to challenge information on your record. If you find something wrong, tell the credit bureau and the company that supplied the information, and attach proof such as a settlement letter or a paid-up statement. Keep copies of everything. The bureau must investigate, but it can take weeks, so start early. Ask the bureau how long corrections take, and ask for a fresh report afterwards.
If you see accounts you have never opened, treat it as possible identity theft. Report it to the credit provider and the police, and tell the bureau.
Build better habits
- Pay on time, every time. Late payments are among the clearest signs of risk to a lender. Debit orders help.
- Pay more than the minimum. On cards and store accounts, paying only the minimum keeps balances high.
- Bring down balances. Clear small debts first, or start with the account that costs you most in interest. Lower balances improve your monthly cash flow, which the bank also looks at.
- Close accounts you do not use. An unused store account or a high card limit can still count against you when a bank assesses what you could owe. Settle them properly, and get written confirmation that the account is closed.
- Do not apply for new credit. Each application leaves a trace, and new debt reduces what you can borrow. Hold off on a new phone contract, vehicle finance or furniture account until after transfer.
- Keep your details up to date. Tell your lenders if your address or phone number changes, so you do not miss notices.
If you are struggling with debt
If you cannot keep up with your payments, speak to your creditors early. Some will agree to a new arrangement. Under the National Credit Act you can also apply for debt review, in which a registered debt counsellor negotiates with your creditors on your behalf. Debt review protects you while it lasts, but it also shows on your record and affects whether a bank will lend to you. Ask the counsellor what it means for a bond application before you start. If you have a judgment against you, ask an attorney or debt counsellor how to deal with it.
Avoid companies that promise to “clean” your credit record for a fee. Genuine errors can be corrected, but accurate negative information cannot be removed on request.
How long will it take?
There is no fixed period. Fixing a mistake can take a few weeks, while rebuilding after real payment problems takes longer, because lenders want to see a record of reliable behaviour. Start as early as you can. If you plan to buy next year, start now.
Your credit record is only one part of the bank’s assessment. Banks also weigh your income, spending and deposit. See how banks decide what you can afford.
What to do next
- Request your free reports and check them this week.
- Dispute errors in writing and keep proof.
- Make a plan to reduce your debts, and use the affordability calculator to see how reducing them changes what you could borrow.
- Put aside a deposit using the deposit savings calculator.
- When you are ready, read about home loan pre-approval.
This article is general information for South African readers, not legal, financial or tax advice. Rules and rates change, so check your own situation with an attorney, your bank or a tax practitioner. Our property calculators can help you work out the numbers.