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Why an acceptable credit score is important

Buying a car is a long-term decision and we want to help you make an informed decision with our Street Smart Series provided by Absa Vehicle and Asset Finance. In this episode, Absa’s Fulufhelo Mandane and Hatfield VW Melrose’s Vleis Manyama explain the importance Receive and maintain acceptable credit score.

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Given South Africa’s changing economic conditions, household budgets are under pressure to meet their financial obligations. This can lead to changes in the credit profiles of individuals. Cars.co.za Social Media Specialist Cagaliso Nyaman asked Absa Vehicle and Asset Finance sales manager Fulufello Mandane and Hatfield VW Melrose dealer director Vlay Mania to tell us more about how these changes could affect your credit score and What are you doing. You can do this to protect your credit profile.

What is a credit score?

Mandan: Credit score indicates the ability to take credit and the ability to comply with the accompanying terms. Banks and other credit institutions use credit scores as part of their credit rating process to decide how financially sound their clients are and whether to give them credit. Credit scores are mainly based on information on the credit score, information usually from credit bureaus.

Factors that affect your credit score include:

  • The length of your credit history
  • Number and type of credit products in your possession
  • How to manage your relevant loans and credit facilities in the past and
  • Your payment history (ie whether you pay on time)

Why is a good credit score important?

Mania: Maintaining a good credit score shows lenders that you are using credit responsibly and are more likely to repay the money you want them to borrow.

Your credit score affects the amount of money you receive in your car financing application. A bad score can lead to you not being considered for a loan, or paying a higher interest rate on the package.

What factors negatively affect your credit score?

Mandan: Factors that play a role include:

  • How much debt do you currently have or do you owe creditors
  • Do you have a limited credit history if you do not have a credit history
  • Did you pay the payments, was it late or did you have a lawsuit against you or
  • Use your full credit limits (for example on your credit card)

What steps can you take to improve your credit score?

Mania:

  • It is important to review your budget and secure enough surplus funds. This will increase the interest rate which will affect the monthly repayment of the loan if you choose a variable interest rate. (Variable interest rate varies over the term of the loan, depending on the principal lending rate)
  • Keep costs to a minimum and costs to meet a low economic downturn.
  • Increase your savings pool for unexpected expenses.
  • Reduce extra credit to get more excess funds for your existing credit or save for unexpected expenses.
  • Manage your credit score effectively and ensure that all debts are repaid on time to avoid negative impact on your credit profile.
  • Consider an automatic debit order related to your payday to make an automatic payment to your bank as soon as your paycheck is credited to your account. This will help you avoid your debit order. Skipping payment on your car will affect the progress of your credit record.
  • Also remember to contact the bank for assistance if you have financial problems

For more information on how you can become a better user, watch other episodes from our Street Smart series and be sure to visit Absa Blog.

Other episodes from our Street Smart video series:

Absa’s Sbu Dhlamini explains the most relevant terms in the installment agreement. Understand your installment sale agreement [Part 1] And [Part 2]

Absa’s Michelle Moodley emphasizes the importance of taking precautions to avoid being trapped by fraudsters. Car Sales Fraud: What You Should Pay Attention To

Absa’s Fulufhelo Mandane discusses what you need to consider before you start purchasing a vehicle, property costs, and your various financial options. Absa First Time Buyer’s Guide to Automotive Finance

Absa’s Gordon Wood describes in detail how the new Aftermarket Guidelines, introduced last year in the automotive industry, will affect you as a car owner. Absa Guide to Owning a Vehicle Responsibly

Related Content:

The New Normal, Podcast 3 – Is It Time to Review Your Car Insurance?

The New Normal, Podcast 2 – Car Dealers of the Future

The New Normal, Podcast 1 – Changes in SA’s car sales patterns

Why an acceptable credit score is important

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