Many people think that as soon as they have completed their studies and landed that dream job, they can go out and spoil themselves to all sorts of things – a car for example, whether it be new or second-hand. The truth is, even if you are able to afford the expense, banks and other financial institutions may not approve your loan just yet.

There has been many changes to the credit laws in South Africa over the last ten years and by law, banks can not lend money to customers who haven’t proven their credibility.

Good news is that there are a few easy steps to follow to build a good credit record:

1. Open a cheque account and transact regularly – Most banks offer cheque accounts, some for individuals earning as little as R2000 per month or students registered with South African Universities.
2. Open a clothing account – Banks and financial services providers look at retail credit and how well your repay your debts. Good retail credit can be built quickly be opening an account with clothing retailers like Edgards, Mr Price, Woolworths etc. Note that buying appliances on credit is not regarded as retail credit.
3. Take out a cellphone contract – Yes, it is time for a new phone. Good bye pre-paid. Signing a 24-month or 36-month contract shows you are committed to paying a predetermined amount to a service provider every month.
4. Apply for a credit card – Let’s buy a thing or two on the credit card. Maybe the pair of shoes you have been eyeing in a designer shop’s window for a while now, or an awesome flat-screen TV for the ultimate movie experience. One of the qualifying criteria for credit cards is a fixed income of as little as R2000 – for more info, consult your bank.

Each South African citizen is entitled to one free credit report per annum, that is one free credit report every 365 days. There are a few companies that issue these reports. Transunion, one of them, has a great facility where one can order the report online which is emailed to you in minutes.

Although credit is easy to access, great care should be taken not to spend more than one can afford. By spending more money than one can afford and not being able to repay those debts may result in a bad credit record where financial services providers can refuse to loan money. By following these easy steps to build a good credit record, the dream car or even dream house is a step closer to reality.