Having good credit affects everything we do in today’s world. It doesn’t matter if you’re buying a new car, a house, or even something as simple as a cellphone contract – all require good credit scores.
In some cases, employers consider prospective employees’ credit ratings before hiring them. As a result, maintaining a positive credit score should be a top priority.
While many consumers could maintain a strong credit score before the economy took a negative turn, the Covid-19 pandemic contributed significantly to falling behind on payments due to retrenchments, or businesses closing.
This made it increasingly difficult for people to maintain their good credit scores. In addition, the soaring inflation rate has had a knock-on effect on pockets. As of June 2022, the National Credit Regulator (NCR) reported R2.19 trillion in outstanding consumer credit balances.
In light of National Get Smart About Credit Day, celebrated on 20 October, Wikus Olivier, the founder and managing director of CreditSmart has provided five tips on how to be smart with your credit status and financial wellness to provide some relief to consumers.
With a focus on credit, debt, and financial management, CreditSmart assists consumers with every aspect of their credit, debt, and finances.
He says: “If you want to see how well South Africans are doing financially, you just need to look at the credit industry statistics. At the end of June, our country had 27 million credit-active consumers.
“The number of consumers with impaired credit records is 10 million. It means that about 40% of all consumers who use credit have missed one or more payments on their accounts.” Wikus continues, “People are also not actively putting money away or saving for a rainy day… they simply rely on credit or debt to get by during tough times.”
Cultivate healthy money habits
Wikus encourages people to cultivate healthy money habits so that their future is bright. “It is also important to make sure that people are aware that being in debt does not mean you have ruined everything. It is possible to get out of the situation,” he says.
Get back to the basics
In his view, people should get back to the basics of financial management so that they do not become dependent on debt, such as credit cards. “Keep your finances in check by not spending money you cannot afford.”
Develop a new mindset
“Our people need to implement a new mindset, new goals, new strategy, and new tools. These include looking at ways to first increase instalments to reduce the repayment period. The consumer approach toward credit should change.
“Rather than being reactive, focus on being proactive to reach your desired goals. Before purchasing a new car, for example, budget according to your affordability instead of putting yourself in a tight financial position when your debit order goes off,” Wikus advises.
Encourage those closest to you to become credit smart
Wikus continues: “Focus on being credit smart and educate your family and friends about your new approach. It will guarantee more fulfillment for everyone. It’s all about changing small habits, not living above your means, and not signing on the dotted line before giving your next move enough thought. If you do not have a cash surplus at the end of the month, you should start budgeting. Measure to manage,” he concludes.
Budget, budget, budget…
To effectively survive the current economic climate, remember to budget, save, and introduce a healthy way of living according to your pocket.
Consider comparing a budget to exercising. Our aim in sports is to achieve our goals with a strategy, an exercise plan, and equipment. This also applies to budgets.
Your budget is your tool to measure your progress toward meeting your financial goals. It will also help you identify financial leakages that causes cashflow issues before the month is through. In order to manage your finances you have to be able to measure it. A proper budget will provide you with a framework to measure and manage your finances.