Debt makes the world go round
By Colin Anthony
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By Leya Mall | 10 July 2019
Welcome back readers, to the Tax-Saving South African, where I walk with you in your personal journey through a range of financial themes
The credit card is a catch 22 personified: if you are financially disciplined and determined to avoid the debt trap, you can’t buy on credit. 
A friend needed a new cellphone after recently letting his go for a little swim. Easy right? Well let me be the bearer of bad news – even though you may have a decent entry level job and you pay your bills on time, the loving cellphone companies may deny you a monthly debit order if you don’t have a credit score ie, debt. As for my friend? He had to pay cash for his new phone (ouch)!
So the moral of the story is to avoid water damage with all your electronics and I can’t believe I am saying this … but perhaps acquire some light debt— and be sure to pay on time – to improve your credit score.
Let’s dive into the perils of credit scores and the trap that comes with it.
What’s a credit score?
A credit score helps credit providers determine whether you qualify for a loan and how much interest you should pay. The higher your credit score the more access to debt you are allowed. Ironic right? That’s how banks and credit retailers make money. Interest is the price you pay to borrow their money or buy on account. Not everyone pays the same price for the same amount borrowed. To get the lowest interest rates you need have a good credit score.
How can I get one?
Your credit score is influenced by five things, according to Intellidex’s head of strategy research Dr Graunt Kruger: whether you pay all your loans on time; if you have a variety of credit types such as phone contracts, store cards, home loans; not to keep opening new cards but rather keeping the one you have for a long time; not to use all the credit available to you so don’t max out your cards and lastly not applying for multiple loans at the same time.
What level is a good credit score?
(Refer to diagram below)
Credit Report SA, which offers detailed personal credit reports, says scores below 526 are seen as unfavourable – even If you manage to get credit, the interest will be extremely high. A score higher than 700 should give you good access to credit at a preferential interest rate.
If you want to get a free credit score visit ClearScore , it’s the one with all those annoying but very persuasive ads on the telly with the dog that keeps repeating “better score, better deals”.
All you have to do is sign up and provide your ID. ClearScore is not a credit bureau but it gives you access to your Experian data, which is a credit bureau. However, the catch is it does sell loan product leads and is a cash-making business after all. South African consumers can get their credit reports from multiple sources, like : My Credit Check which works similarly to ClearScore.
Needless to say, because I preach cash-based purchases, my credit score is next to non-existent. Trust me I checked…
Is debt a good idea?
No! But because life isn’t fair there are times when you are compelled to buy on credit. Choose carefully which items to purchase with debit and be sure to pay the instalments on time to elevate your credit score. What you definitely need to avoid is being blacklisted, which companies do to bad payers. Imagine going through life without being able to buy anything on credit.
One more thing…
This will be my last column as editor of Savetaxfree.co.za, I have decided to undertake my media masters degree while I have the opportunity and energy. I hope, like me, you have learned a lot about tax-free savings accounts and very complicated personal finance topics. A crucial thing to know about but one for which, unfortunately, schools and tertiary institutions do not prepare you.
I’ve really enjoyed this fantastic opportunity to walk the journey with my readers.
One other thing…
Remember the Sars e-filing process from the Happy Tax Year article? It’s officially open, so don’t forget to do your tax returns if it applies in your situation. You never know, you may just get a nice little gift from Sars in the form of a refund.
Thanks for following this series and becoming a wiser tax-saving South African!
By Colin Anthony
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