Your credit score improves when you meet your monthly debt obligations. However, it can be difficult to qualify for a loan, or you may not wish to take on further debt.
An easy way to boost your credit score, while avoiding these options, is to have an internet or mobile phone contract in your name. We have a look at how this works, and what the benefits are.
Tip: Sign up to CreditSav today to find out what your current credit score is.
What makes telecom contracts different?
According to Ayanda Ndimande, business development manager for retail credit at Sanlam, internet or mobile phone contracts fall under short-term credit.
It’s usually easier to apply for these kinds of contracts than for a personal loan or a home loan, and they won’t land you in long-term debt.
If you have an internet account that you’re paying month by month, technically you won't be taking on further debt either. However, it will still count towards building your credit score if you switch to a contract.
Why are these contracts beneficial?
Ndimande says that these contracts will appear on your credit report, and thus have the potential to boost your credit rating.
“Over time, if your payments are punctual and consistent, a healthy credit score is built. This will benefit you when the day comes that you need to apply for more substantial credit,” says Ndimande.
“However, if you miss payments on your mobile or internet contract, your credit rating and your ability to get further credit will be negatively affected,” she cautions.
Ndimande says that short-term credit in general constitutes smaller, more affordable amounts that are paid over time, potentially creating a record of good payments.
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