What does credit wellness mean to you?
Have you ever thought about trustworthiness in financial terms? That’s essentially what credit wellness means. It's similar to holding the key to a treasure chest, not just in value, but in the opportunities and doors it can unlock for you in your financial journey.
The basics of credit
Credit is not just about numbers on a screen or a card in your wallet. It's a complex system that assesses your reliability as a borrower. In essence, it's a trust factor. Credit lenders, whether for a home loan, a car, or even a new credit card, want to know that they can trust you to pay back what you owe.
Why credit matters
The importance of credit extends beyond the ability to get loans or credit cards. It can affect your ability to rent an apartment, secure certain jobs, or even start a business. A strong credit reputation can pave the way for a smoother financial journey, allowing you to achieve major life milestones with ease.
What the public thinks credit wellness means
JustMoney spoke to ordinary South Africans to find out what their understanding of credit wellness is and how they employ this in their financial lives.
27-year-old Kirsten explains: "Credit wellness reflects your credit score and the state of your credit accounts. It shows how you pay your dues, whether any accounts are in arrears and the ratio of your debt to your income. After accounting for all expenses, understanding your credit wellness offers insights into your overall financial status and position."
24-year-old Liezl remarks: "To me, credit wellness isn't just about having a good credit score. While that's the first thing that comes to mind, the term 'wellness' suggests a deeper understanding. I believe it encompasses having robust financial knowledge, enabling you to make informed decisions about your life."
25-year-old Claudine believes that credit wellness goes beyond just numbers. "For me, it's about fostering a healthy relationship with a credit provider, especially as I've just begun building my credit record this year. It's essential to nurture a positive relationship with a credit provider to establish trust," she shares.
Meanwhile, 27-year-old Jane has a more straightforward take. "Credit wellness, in my opinion, encompasses three main points: maintaining a good credit score, ensuring you can comfortably manage and repay monthly debts, and having a credit standing so strong that you can readily access credit whenever necessary," she says.
Components of Credit Wellness
Much like the way our grades in school provide an overview of our performance, a credit score is the financial grade lenders use to assess your creditworthiness. Your score can change, and it's influenced by your financial behaviours. Late payments, your total debt, and the length of your credit history are just some of the factors that can affect it.
This is your financial biography. It provides a detailed account of your credit history, from the loans you've taken out, and your payment consistency, to the types of credit you have. It’s a snapshot for lenders to assess your reliability.
Red flags in a credit report
Certain factors can raise alarm bells for potential lenders. Regularly missed payments, legal action, or mounting debt, can indicate financial distress or poor money management.
The emotional side of credit wellness
Freedom and peace of mind
Having a healthy credit profile isn't just about the tangible benefits. The intangible perks, such as a feeling of security, freedom from stress when making big purchases, and peace of mind derived from knowing you're in good standing, are equally important.
The anxiety of bad credit
Conversely, a poor credit profile can cast a shadow over your financial decisions, making each purchase or investment decision a source of anxiety. It can feel like you're constantly trying to catch up, with no relief in sight.
Tips for maintaining credit wellness
Regularly review your credit report. This not only ensures you're aware of your standing but also helps in identifying and rectifying errors or signs of identity theft.
Overspending can lead to overwhelming debt. By budgeting wisely, prioritising payments, and avoiding unnecessary expenses, you can maintain a healthy debt-to-income ratio.
Seeking professional advice
When in doubt, turn to the experts. Financial advisers or credit counselling services can offer tailored strategies and guidance to enhance or repair your credit profile.
The broader impacts of credit wellness
A robust credit profile amplifies your purchasing power. Whether it's negotiating lower interest rates, qualifying for higher loan amounts, or for premium credit cards with lavish rewards, good credit wellness can significantly elevate your financial standing.
Your decisions today have consequences for your future. By nurturing your credit wellness now, you're laying a firm foundation for future financial endeavours, whether buying a home, investing in education, or retiring comfortably.
Your credit wellness is an intricate tapestry woven from your financial choices, habits, and experiences. By understanding and valuing its importance, you can unlock a world of opportunities and ensure a brighter, more secure financial future. To improve and maintain your credit wellness and credit score, visit JustMoney's credit platform today.
What's the ideal credit score?
Credit scores vary between credit bureaus. On the JustMoney platform, a score of 901 upwards is optimal, but anything above 850 is considered good and affords many financial advantages.
How often should I check my credit report?
You should check your credit report at least annually; however, you can check your score as often as you wish, via a credit score intermediary. Checking monthly is advisable – this will enable you to address any issues rapidly.
Can I fix a poor credit score?
Absolutely! With the right steps, discipline, and expert assistance where needed, you can improve your credit score.
Does personal credit score checking affect the score?
No, self-inquiries are considered to be "soft inquiries" and won't affect your score. However, frequent checks by lenders, known as "hard inquiries", can have an impact.
Are credit repair services genuine?
You may have heard of companies who claim they can fix your credit score in a matter of days. Unfortunately, this is too good to be true. There is no quick fix for a damaged credit score, and it is illegal to charge a fee for a “credit repair” service. We have covered credit repair scams in a comprehensive article.