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MONEY CLINIC | I pre-qualified for bonding, but my credit score has since plummeted. And now?

Although too many credit inquiries can affect your credit score, denial of credit does not impact your score.

A Fin24 reader considering buying a home found that her credit rating had plummeted after applying for credit since pre-qualifying. She writes to an expert for advice on how to remedy the situation.

I pre-qualified for a deposit of over a million rand, but my credit score was 599 at the time. I then opened a platinum checking account and I am still waiting for the delivery of the card.

The banker didn’t let me know that she was also trying to see how much I could claim, for a credit card that was declined. My credit score dropped to 537.

I have no debt because I paid off a loan I took out in January. I only have one clothing account left with a 300 rand deposit to pay.

If so, what options do I have to improve my credit rating? I desperately need a house. Is it possible to write a letter to motivate the bank with settlement letters?

Kriben Reddy, consumer manager at TransUnion Africa respond :

The biggest influence on your credit score is how you manage your accounts and whether you pay your accounts on time. Although too many credit inquiries can affect your credit score, denial of credit does not impact your score.

We suggest you complete your credit report, which is available free of charge once a year from TransUnion, and review it carefully to see if there are any outstanding debts or judgments against your name. If there is information that you do not recognize or disagree with, you can file a dispute with the credit bureau, providing them with settlement letters if necessary.

This process is legislated and takes 20 business days. You can then approach the bank to demonstrate your modified credit file.

The most important things you can do to improve your credit score are:

  • Manage your accounts. Be sure to pay your accounts each month and, if you can, pay more than the minimum balance due each month, otherwise you’ll end up paying more interest than necessary. Partial payments can negatively impact your score and force you to catch up with growing overdue debt.
  • Limit your amount of debt. Keep the use of your current credit facilities below 35% of your limit.
  • Limit your search activity. Do not seek too much credit at the same time. Too many inquiries in a short period of time could alert lenders to your current financial situation.

Warning: Feedback is based on general findings. We are unable to comment on this specific reader’s situation without reviewing their credit profile. The credit and risk policies applied by credit grantors are their own and the credit bureau has no view of them.

Questions may be edited for brevity and clarity.