Missed payments, applying for too much credit, foreclosure, or having a judgement against you can harm your credit record.
No matter the reason, you’ll need to rebuild your credit history so lenders will view you as a low-risk borrower.
With patience and the right mindset, rebuilding your credit history is possible. This guide will help you regain your financial stability step by step.
Understanding your credit score
Your credit history has a direct impact on your credit score.
Before we examine how your credit history is built, let’s explore what your credit score means, and why it matters.
What is a credit score?
Your credit score is a number that represents how creditworthy you are, which helps lenders assess the risk of lending to you.
Your score is less important than the credit band in which you find yourself, which tells lenders how you compare to your peers.
Different credit bureaus use various scoring models, but your score generally falls into one of the bands represented below.
901 to 999: Excellent
851 to 900: Good
801 to 830: Okay
601 to 800: Needs work
3 to 600: Not good
0 or 1 to 2: Not enough information to score
On the DebtBusters platform, your credit score is calculated on a scale from 0 to 100. Here’s what the bands mean:
Why a good credit score is important
A good credit score opens doors to financial opportunities and benefits, such as:
- Easier loan and credit card approvals
- Lower interest rates, which can save you thousands of rands
- Access to premium banking products with better benefits
- A higher chance of rental or home loan approvals
- Improved insurance rates and employment prospects (especially in the financial sector)
Factors affecting your credit score
Now that you know the advantages of a good credit score, which factors affect it?
- Payment history. This is the key factor, making up around 35% of your score.
- Credit usage. Using a low percentage of your available credit boosts your score.
- Outstanding debt balances. High debt has a negative impact on your score.
- Length of credit history. A longer, well-managed history builds trust.
- Types of credit used. Having different types of credit shows you can manage different types of loans.
- New credit enquiries. Too many applications for loans indicate you may be over-reliant on credit.
Be mindful of the above factors when attempting to rebuild your credit history.
What makes up your credit history?
Your credit history is a record of how you’ve managed your debt in the past, and lenders use it to determine your reliability. Every time you make a repayment, apply for a new credit line, or close an account, your credit history is impacted.
If you’ve maintained a good credit score over time, you’re considered responsible. A good credit history increases your chances of loan approval, while a poor record can limit your financial options.
Assessing your current financial situation
To rebuild your credit history, start by evaluating where you stand financially.
Access your credit report
Request a copy of your credit history from any one of the major South African credit bureaus.
The four main credit bureaus are Experian, TransUnion, VeriCred Credit Bureau (VCCB), and Xpert Decision Systems (XDS).
Review your credit report
Review your credit report for errors, which may include:
- Accounts that don’t belong to you
- Incorrect account details
- Outdated negative information
Dispute any errors with the credit bureau that supplied the information, and take steps to correct them, since they may have a negative impact on your score.
Identify negative entries
Late payments, arrears, or default judgements can hurt your score. Addressing these issues is essential for financial recovery.
Here are some effective strategies to address your debt problems.
Create a strategy to rebuild your credit history
You can’t get out of debt through wishful thinking. You will need a structured approach to improve your financial situation.
Consider taking the following steps.
Set up a budget
This is key to improving the way you manage your money.
Set up a budget to get a clear view of your income and expenses, and consider where you can cut spending. However, be careful not to eliminate something you really need, such as insurance or medical cover. Your budget should also include your debt obligations.
Need debt counselling or consolidation?
Explore DebtBusters' solutions for reducing your interest rates and unlocking cash.
Find out morePrioritise debt repayments
Focus on paying off high-interest debt first, while continuing to make minimum payments on other debt. This reduces the long-term cost of interest.
Explore debt consolidation
If you’re overindebted and know you can’t fit debt repayments into your budget, you may need to consolidate your debt.
Debt consolidation can simplify your repayments by combining multiple debts into one lower-interest payment.
A qualified debt expert can help you understand your situation, draw up a solid financial plan, and negotiate a structured debt repayment plan with your credit providers.
A debt expert can also negotiate on your behalf, preventing your creditors from contacting you directly or taking any legal action against you, such as default judgements.
DebtBusters – your partner in credit recovery
DebtBusters, the largest debt counselling company in South Africa, specialises in credit improvement.
Our qualified counsellors offer effective personalised solutions that can set you on the path to debt freedom.
Tailored debt-management plans
At DebtBusters, we’ll assess your finances and create a customised debt management plan to suit your budget and obligations.
This plan will fit your unique circumstances and help you work towards improving your credit score, among other goals.
Implementing healthy financial habits
Good money habits form the foundation for financial security and will help you reach your goals.
Pay your bills on time
Paying your bills on time demonstrates responsible financial behaviour. Overdue payments are reported to credit bureaus and can significantly lower your credit score.
Consider automated payment reminders or payments to ensure this key obligation doesn’t slip your mind.
Keep your credit use low
Using less than 30% of your total credit available to you signals responsible financial management.
Diversify your credit mix
Different types of credit, such as credit cards, instalment loans, and mortgages, can boost your credit score if managed well.
Monitor your progress
Regularly check your credit report to track improvements and stay on course.
Professional guidance on credit challenges
DebtBusters ensures you’re not alone on your credit journey.
We offer ongoing support to ensure you stay on track, helping you address your particular credit challenges.
Taking control of your financial future
Rebuilding your credit history is not just about fixing past mistakes – it’s about creating a secure financial future. With the right strategies and support, you can achieve lasting financial stability.
Empowerment through knowledge
Armed with the correct information and plan, you have the power to reshape your financial approach and credit history.
Building a stronger credit profile
Consistently practising smart financial habits will help you improve your credit score over time, unlocking better financial opportunities.
With patience and expert guidance, you can successfully rebuild your credit history and achieve long-term financial stability.
DebtBusters can support you on this journey. Changing financial habits takes time, but with the right approach, you’ll regain control of your finances.
Frequently Asked Questions (FAQs)
Is it possible to improve a bad credit score?
Yes. With consistent effort, and through smart financial habits, your score can increase over time.
How long does credit recovery usually take?
The time frame varies based on individual circumstances, but you can start seeing improvements within a few months to a year.
Can DebtBusters assist with all types of debt management?
DebtBusters specialises in managing unsecured debt such as credit card debt, personal loans, and retail accounts. We can also assist with other debt types, such as your home loan.
Are there any DIY credit repair methods?
While there are steps you can take on your own, it is sometimes necessary to engage a debt expert.
DebtBusters can offer you professional guidance, making the credit repair process more effective and less painful.
Will rebuilding my credit history prevent future financial challenges?
Yes – if you maintain good financial habits and avoid becoming overindebted. It’s worth maintaining a good credit score as this will make it easier for you to access credit and secure better loan terms in future.
