How to Improve Your Credit Score

How to Improve Your Credit Score

Well, first of all, what's a credit score? It's a score that allows financial institutions such as banks and leasing companies to get an idea of how credit worthy you are. This is traditionally created using your credit repayment history - loan repayments, credit card payments, cheque returns, and your tax compliance details. You get points for performing well, and lose points for not meeting the standards they set. This will include facilities such as loans or credit cards taken in your name, and also facilities that you have taken jointly with someone else, or that you have given a guarantee for. This score basically lets them see how likely you are to make proper payments. 

There is currently no credit scoring system that gives you a specific credit score throughout the country, but MMA is in the process of creating one. Banks already use these processes to derive their own credit scores of customers, using the bank's internal repayment history as well the repayment history at other banks, and it is one of the most important factors they consider in their loan approval processes.

So, how can you make yourself more credit-worthy?

1. Only take loans or things on credit if you know you can pay them back on time.

2. Set payments to be made automatically - these are called auto deductions or direct debits. Then, when the due date is close, make sure you have enough in your account to make these payments. These automatic payments, understandably, can only be made when you actually have enough funds in your account.

3. Don't make payments via cheque if you don't have that amount in the bank already. Do not issue cheques counting on your own receivables (money that you are supposed to get), because if your receivables are late, your cheque could bounce. Cheque returns due to insufficient funds are a legal offense. This means that the recipient of the bounced cheque could take you to court as well.

4. If your financial situation changes, and you cannot financially afford to make timely payments for your existing loans, talk to your bank and try to refinance your loan. It is always better to seek an alternative and discuss your situation than to simply default on payments without any effort to improve things. See if they will consider extending your loan tenor so that your monthly repayments are lower. After evaluating your situation, the bank could arrange this so that you are able to continue making payments without being blacklisted. It is better for the bank than completely writing you off as well.

5. If you have any tax payments that you forgot to make or that you are unable to pay, talk to MIRA and they could put you on a payment plan where you make your payments in installments. By agreeing to this, you manage to get your tax clearance and make payments properly to MIRA.