How to Build Credit in South Africa From Scratch: 6 Habits That Work

Building credit feels like a catch-22: lenders want a history, and you need credit to get one. There is a way through, and it is mostly boring habits.

This guide covers how to build credit if you are starting out, or rebuilding after problems.

What does it mean to build credit?

It means creating a record at the credit bureaus that shows you borrow modestly and repay reliably. The bureaus see your accounts, your payments and your enquiries. Over time that shows a pattern lenders can trust.

Read what a credit bureau does if you want the background.

What are the 6 habits that help you build credit?

The order matters. Paying on time comes first, and most of the rest is detail.

How do you start with no history?

1. Start small. A low-limit account that you can pay off, such as a small retail account.
2. Use it lightly. Spend what you can pay in full.
3. Set a debit order for at least the minimum payment, and keep money in the account.
4. Ask whether the provider reports to a credit bureau. If it does not, it will not build your record.
5. Be patient. A track record builds over months, not days.

If you do not need credit, you do not have to take it. A zero balance does not hurt you. It only means a lender has less to judge when you apply.

What if your record is already damaged?

Start by understanding it. Get your free report and see which accounts are overdue, which items are wrong and which are accurate. Then:

• Dispute errors. See credit report disputes.
• Make arrangements on overdue accounts, in writing.
• Pay on time from now on, even small amounts.
• Avoid new debt until you are stable.

Our guide to improving your credit score gives a 90-day plan.

What should you avoid when you build credit?

Companies that charge to “repair” or “clean” your credit often promise things they cannot deliver. Accurate negative information cannot simply be removed. Errors you can dispute yourself, for free, through the bureau and the Credit Ombud.

Also avoid:

• Taking a loan only to build credit. You pay interest for little benefit.
• Missing payments on a small account because it seems unimportant.
• Closing every account at once. It can shorten your history.
• Borrowing from a lender that does not report to a bureau. It will not build your record.

How long does it take?

There is no fixed number. Improvements usually appear over several months of steady behaviour, and serious damage takes longer to fade. Payment history can stay on your record for up to five years under the National Credit Regulations, which is why starting early helps.

Be sceptical of anyone who promises a specific score by a specific date.

What could a 12-month plan to build credit look like?

Credit builds slowly, so a plan helps you stay with it. Here is a realistic outline for someone starting with a clean slate:

The plan is dull on purpose. A steady record over a year tells a lender more than a burst of activity.

How much of your limit should you use?

Lenders see a low balance, compared with the limit, as safer. Here is a hypothetical example on a store account with a R2,000 limit.

Using R400 and paying it off looks relaxed. Using R1,900 every month can look like you depend on the account, even if you pay on time. If you can, spend what you can clear in full and keep the balance well below the limit.

Which accounts usually report to the bureaus?

Only accounts that are reported can build your record. In general:

• Usually report: bank accounts with credit, credit cards, store accounts, vehicle finance, home loans and cellphone contracts.
• Often do not report: stokvels, informal lenders, money you borrow from family, and cash purchases.

Before you open anything, ask whether the provider reports to a credit bureau, and to which one. An account that stays invisible helps you in no way. For the background, see what a credit bureau does.

What does a missed payment cost you?

A single late payment is not the end of your record, but it does leave a mark. It can lower your score, may be listed on the account’s payment history and can make a lender more careful for a while.

Payment history can be kept for up to five years.

That is why the debit order matters more than anything else you do. Set it up on day one, keep a buffer in the account and set a reminder three days before.

If you cannot pay, contact the provider before the due date and ask for options.

How do you know it is working?

Check your free report after six months. You should see the new account, a clean payment history and no surprises. If you see a problem, dispute it straight away. See credit report disputes.

Your score is a summary, and different bureaus show different numbers. Focus on the behaviour: on-time payments, low balances and few applications. The score follows. For the longer picture, read about good credit scores and how credit scoring works.

Frequently asked questions