Real Estate Investor Magazine South Africa May/June 2019 | Page 37

and many thousands of Rands over the lifetime of the loan.
A 0,5% concession on a 20-year loan of R1,5m translates
into potential savings of R6000 a year off your home loan
instalments, and more than R120 000 worth of interest over
the lifetime of the loan. This is why it can come as a big
disappointment to find that your credit score is not as high
as you thought it would be, especially when you’re diligent
about always paying your bills on time. Most of the reasons
this could happen are relatively easy to fix.
•
The first potential problem is that there have been
too many recent inquiries logged against your credit profile.
Of course it can pay to shop around when you’re looking for
credit on favourable terms, but each time you request a quote,
the lender will want to see your credit record, and if your
requests are spread over more than few days, each inquiry will
be logged separately and it will look like you are applying for
several different loans or other forms of credit.
This is one of the reasons why you shouldn’t apply for car
finance, for example, at the same time as you are trying to
buy a home. It is also why it is always better to apply for a
home loan through a bond originator. They only need to pull
your credit report once before submitting your application
to multiple lenders and ensuring that you get the most
competitive interest rate.
Secondly, your lower-than-expected credit score could be
your past catching up with you. We often find, for example,
that prospective borrowers have black marks on their credit
records from years ago because they forgot to actually close an
old bank account, for example, and the monthly fees have been
mounting up unpaid. Or they may have changed address and
missed a bill or two.
Alternatively, you may have had a debt judgment against
you and paid it off, but not realized that they needed to advise
the credit bureau and have it removed from their record.
Sometimes it is just a question of the credit bureau actually
having the incorrect information, such as the wrong initials or
the wrong ID number and penalizing the client for someone
else’s bad payment record. This is why you should check your
own credit record at least once a year.
Thirdly, consumers can be penalized not for using too
much credit, but for using credit too much. Your score will be
lowered if you max out your credit card every month, even if
you pay off the balance on time and in full before the due date.
What matters here is how much credit you have available and
how much you’re using - or your credit utilization ratio – so
you should try to keep the balances as low on possible on all
your lines of credit.
Finally, not using credit at all can also have a negative
impact on your score. Many people have been taught to save
for what they want and never get into debt, but if you have no
credit history, there’s nothing to show that you’re a responsible
borrower who can manage balances and payments. It’s better
to maintain at least one active account, like a phone, store or
rent account, that you are careful to pay in full and on time
every month.
Next month: Part 3: Finding an Investment Property
SA Real Estate Investor Magazine MAY/JUNE 2019
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