10 Credit Card Tips for Newbies
Credit cards are great but if you are too new to them then you need to know how you are able to manage them and steer clear of trouble.
You will then need to know what bad credit is and what it means to you. There are also 10 credit card tips to help you on your way with your new credit card.
What is Bad Credit?
There is a growing problem within South Africa which is bad credit but what exactly is bad credit and what are the problems that are associated with having bad credit.
Generally people have a feeling about their credit score and they do know when it is bad. Your credit score may be scored differently depending on who holds your credit record. It is not the credit agencies that will decide if your credit score is good or bad. It is generally the individual lenders and insurance companies.
They use the scores to be able to decide which of the scores an acceptable level of risk is. The lenders will use the score in various to determine certain factors such as:
The interest rate that will be charged on the loan and in the case of an insurance company they will use it to see if they can offer a discount on an insurance policy.
If they can extend the credit, the credit that they can approve, if they can increase or decrease the credit limit and to see if they should close an account that is deemed as risky.
Your credit score is only decided by the lender and seen as bad when it stops you accomplishing certain aspects.
If a lender sees your credit score as bad then it may stop you from refinancing a loan, being able to borrow on a lower interest rate or being able to get a better insurance deal.
If you are unsure about your credit score you are able to find sites where you are able to check your credit score each month.
These reports will show you your payment history, debt and other factors that could affect your score.
If there are problems that are highlighted they will usually offer advice to you about how you can start to improve your credit score.
Credit in South Africa Statistics
Statistics on the Consumer Credit Market have been produced since 2007 by The National Credit Regulator.
The data shows that the consumer credit market has made a shift from the provision of secured lending to that of unsecured lending. There is a strong emphasis on unsecured personal loans.
One notable aspect was the hasty increase in unsecured personal loans and the slowing of new mortgages that were being granted.
Unsecured loans do not require collateral which may make them riskier but are in fact more lucrative for banks according to research. This is then a contributing factor to the rise of unsecured loans within the South African market.
The graph above supports this claim as it shows in 2007 mortgages make up 51.91% of the new credit granted compared to unsecured personal loans at 7.75%.
At the end of March 2012 there is a different trend where mortgages have dropped to 25.85% and unsecured personal loans have increased to 23.10%.
In less than 5 years we can see that unsecured lending has grown from R23bn to an R50bn industry in the financial service industry.
The Official Reserve Bank figures show that the unsecured lending to households has gone up to 35% in February 2012.
The dwarfed credit lending growth has remained at a balanced 8%.
For more information on credit changes visit Collectivity.