Master your credit: essential tips for South Africans

Credit can be a vital tool for financial well-being, yet many South Africans lack basic knowledge about how it works and how to use it effectively. Data collected by the National Credit Regulator reveals that over 36% of South Africa’s 28 million credit-active consumers have impaired records. Of these, 22% are three months or more in arrears, 11% have “blacklistings” against them (or “adverse listings”) which means a history of late payments or defaults, and 3% have judgments and administration orders.

Mariné van Brakel, deputy CEO at RCS, believes that financial literacy education is the key to South Africans taking control of their credit health. "Studies have shown financial literacy to be a foundational element in effective debt management.

“By understanding how credit scores work and what affects them, South Africans can actively improve their financial standing by using credit to their advantage," she says. 

What factors affect your credit score

A credit score is shaped by several key factors, including:

• Payment history: This is essential, as consistently making the minimum repayments on time demonstrates positive financial habits. To avoid your score being negatively impacted by late or missed payments, you can set up automatic debits or reminders.
• Credit utilisation: This measures the amount of available credit you’re using, calculated by comparing your outstanding balance to your total credit limit.
• Length of credit history: The longer your credit history, the better, as it provides a track record of how you handle debt over time. To build up a credit history, start small by applying for credit products like an RCS, another store card, or a personal loan. 
• Recent credit applications: Applying for multiple new accounts or loans within a short period can be seen as risky behaviour and may negatively impact your score.

“There are many moving parts that make up a credit score, and each of these factors contributes to a holistic picture of your financial behaviour and trustworthiness,” explains van Brakel.

How to rehabilitate your credit score

The first step to better credit management is to keep track of your credit score. “It’s important to look for inaccuracies and dispute any errors, as these can impact your creditworthiness,” van Brakel adds. This is where the partnership between RCS and the Welltec Group’s Credit Gateway platform comes in. Using the platform, you can obtain a free credit report and credit score in under five minutes. All that’s needed is a valid South African identity number. It’s important to highlight that requesting the report will not have any negative effect on your credit rating.

Once you know where you stand, the next step is to ensure you always make repayments on time and work towards reducing outstanding debt as quickly as possible. By budgeting effectively, planning your spending, and avoiding unnecessary credit applications, you can steadily build a stronger credit profile.

Why your credit score matters

A good credit score can open doors to better loan terms, lower interest rates, and a wider array of financial products, explains van Brakel. “Credit providers use your score as a key indicator of risk, meaning that a higher score often results in more favourable conditions. Understanding and managing your credit can be the difference between financial stress and achieving your long-term goals.”

Beyond personal finance, credit also plays a crucial role in economic empowerment. Access to responsible credit allows individuals to invest in their futures, whether through home ownership, education, or entrepreneurship. However, reckless lending and over-indebtedness remain major challenges in South Africa.

“Understanding credit is not just about avoiding debt; it’s about using it as a tool to enhance financial stability,” van Brakel explains. “By taking proactive steps to manage credit responsibly, South African consumers will be better positioned to build a stronger financial foundation for their future,” she says.

PERSONAL FINANCE