No Credit vs Bad Credit

Written by Your Future Now

It seems like South Africans are becoming synonymous with the term ‘bad debt’ as the cost of living keeps rising and the Rand to Dollar exchange rate keeps weakening on a daily basis. According to Neil Roets, CEO of Debt Rescue, South African consumers now owe around R 1.6 trillion rand in debt collectively.

While this statistic is quite alarming, there are still some South Africans who choose to live a debt free life as far as possible. These folks’ ‘if you don’t have the money in the bank to pay for it, you can’t afford to buy it’ perspective on life is definitely the way to go if you want to save yourself from drowning in your own debt. Just make sure that living this lifestyle doesn’t end in you shooting yourself in the foot.

Using cash to steer clear from debt might be the best way to go when you want to keep your head above water, but what are the implications of not building up a credit score? Failing to build up a good credit score can see you having limited access to quite a few things in life. Whether you need a place to stay or a vehicle to get you from point A to point B, having a good credit score is essential these days. Buying a car or a house with cold hard cash seems impossible to the average citizen of Mzansi. Even if you rent the apartment or house you live in, the landlord or rental agency probably checked your credit score before they handed over the keys to your pad.

If you have been living a strictly cash life, building a good credit score will take time and requires discipline.  The first step on your good credit score journey starts with knowing your status. You can get a credit report at all credit bureaus. Factors like how long you have been working at your current job, how often you move residences will influence your credit score. You can improve your credit score by paying bills on time and even trying to pay more than the monthly minimum required payment if possible. Make sure that these bills and accounts are registered in your name – if you pay bills in a timely fashion or make additional payments on your accounts but they are not registered in your personal name, you are working against yourself and wandering off your good credit score journey.

A bad credit score will also see you struggling through life. As mentioned earlier, there are certain things that will require you to enter a credit agreement at a certain point in your life. Having a bad credit score will see most financial institutions slamming their doors in your face when you come knocking whether for a vehicle financing, a home loan or a personal loan. Credit should never be used for non-essential purchases. Credit doesn’t always have to be the bad guy, as it is usually made out to be. When used correctly and responsibly, credit can improve your life and the life of your family. Good debt can range from anything like a home loan or even a personal loan – how you apply that personal loan however will determine if it’s good debt or bad debt.

Having a bad credit score is much worse than having no credit score. Both of these however will see you living a limited life, unless you are Oprah rich of course.  Try to build a good credit score at a steady and responsible pace if you want to avoid doors slamming in your face in the future. I’m pretty sure even Oprah doesn’t have a strictly cash policy.

Article Categories:
Consumer Protection · Credit and Debt

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