Right now, the world can’t stop talking about the so-called Tinder Swindler, the smooth-talking conman who used dating apps to meet numerous women, and then ran up huge lines of credit and loans in their names, leaving them with massive debts.
And if you think it couldn’t happen to you, think again. Every day, people either take out loans for other people, or sign guarantorship for someone else’s loans. If, for any reason, there are defaults on the agreement you could be putting your credit record at great risk and this can take several years to recover from.
“What few people realise is that it’s not only late or missed payments that put a dent in your credit score, or make lenders wary,” says Davina Myburgh, director of consumer interactive at TransUnion Africa.
“Taking out too much credit in a short space of time can be damaging to your credit rating, and your ability to get credit in the future. And if you’re taking out those loans for someone else, no matter what the reason, the risks to your financial health increase exponentially,” said Myburgh.
Here are the top three credit items that concern lenders (apart from giving money to someone you’ve just met online, that is) and how to avoid them.
Too many loan applications
There’s no problem with opening a new credit card, or taking out a revolving credit facility. But if you suddenly open two or three new credit facilities in a short space of time, what you’re telling lenders is that you might be in financial trouble. At the very least, you’ll be attracting attention the next time you ask your bank for credit.
Someone else’s debt
When you sign surety on a loan for a child or a relative (or someone you met on Tinder), that debt can get you into trouble if they don’t meet their payments. You will be held accountable, and it will reflect on your credit report and affect your credit score negatively. When you get around to applying for new credit yourself, lenders will view your guarantorship as part of your debt load.
Lots of ‘hard’ credit enquiries
Every time you apply for credit, the lender will draw a credit report on you – something known in the trade as a ‘hard’ enquiry. Many people don’t realise that too many hard enquiries to check your credit worthiness can negatively impact your credit score as it can be seen as a sign of financial stress. Be aware, hard searches can often come from unexpected sources, like applying for a new cellphone account or requesting a credit limit increase. A lender should tell you and request your permission before conducting this type of search, so make sure that you’re only applying for credit when necessary to avoid dragging down your score.
To make sure you stay on top of your credit score, and keep your finances in good shape, make a habit of checking your credit report regularly. You get one free credit report every 12 months through providers like TransUnion.
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