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Multiple sources of credit can lead to high levels of debt
Community Coordinator
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Credit is all about convenience and allows you to achieve your financial goals and objectives. For example, when applying for vehicle finance, personal or home loan, your bank will look at your credit history.

Using and paying off a credit card on time is an easy way to build up a positive credit record. This means quicker approval for loans and possibly even lower interest rates.


However, it is important that one avoids multiple sources of credit as this can have an impact on your credit score, such as:


  • A low credit score can lead to you being classified as a risky borrower.
  • Restricted access to future credit on a personal level would mean that important loan facilities such as vehicle finance, a home loan, and overdraft as well as credit facilities such as credit cards will no longer be made available to you.
  • Many companies also run credit checks on applicants for new positions, so your job prospects can also be affected.
  • If you are a business owner, poor personal credit scores can affect your ability to secure loans for the business or favourable payment terms from suppliers.


Other tips for managing debt include:


Know who you owe money to and how much - Keep an up-to-date list of all your debts, including creditors, total amounts, monthly repayments and deadlines.

Put together a monthly budget - An effective budget helps you see how much money is coming into your account and how much is going out. Stick to your budget

Prioritise your debt list - Pay extra towards your debts that carry higher interest rates.

Pay what you can - While paying a little extra than what you owe every month is ideal – you’ll pay off your debt faster – it’s not always possible. But at least make your minimum monthly payment.

Avoid irrational or impulsive spending - Set aside an amount you can afford monthly to devote to luxuries or indulging. Creating this small splurge fund or adding a category for indulgences in your budget will allow you to spend money on things you really want.

Consider debt consolidation - Debt consolidation means taking out a new loan to pay off several smaller debts. Multiple debts are combined into a single, larger debt, usually with more favourable pay-off terms, such as a lower interest rate or lower monthly payment or both.


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