Taking out your first personal loan isn’t just about accessing cash - it can be a strategic tool to build a strong financial reputation. In South Africa, a solid credit record can unlock better interest rates, smoother loan approvals, and even favourable terms for other credit facilities. In this article we provide some expert tips on how to use your first personal loan to enhance your financial standing.
1. Understand the National Credit Act (NCA)
Tip: Familiarise yourself with the National Credit Act (2005) before borrowing.
Impact: Knowledge is a powerful tool when it comes to enhancing your financial understanding. The NCA ensures you’re protected - lenders must conduct affordability checks, disclose all costs in plain language, and treat you fairly. This knowledge helps you avoid reckless borrowing, and will ensure that you get your credit journey started on the right footing, signalling maturity to lenders.
2. Check Your Credit Report Beforehand
Tip: Have a look at your current credit score, you can do this for free on the RCS website. This will give you a complete understanding of your current position before taking on any credit.
Impact: Spotting and fixing errors before applying avoids unnecessary repayment delays or loan declines. It will also allow you to determine the growth of your credit reputation in the months to come.
3. Borrow What You Can Repay
Tip: Only borrow what comfortably fits your monthly budget and income.
Impact: Personal loans are instalment-based, so consistent, on-time repayments have the biggest impact on your credit score (around 35%). Paying what you can afford strengthens your reputation and prepares you for future credit.
4. Automate Your Payments
Tip: Use a debit order or standing instruction to ensure repayments go out on time.
Impact: Avoiding missed or late payments is crucial - such slips can stay on your report for up to 24 months, and damage your creditworthiness. Automation helps keep your record spotless and builds trust with lenders.
5. Keep Credit Utilisation in Check
Tip: Treat your loan as an instalment (non-revolving) debt, while avoiding your credit card limits from being maxed out.
Impact: Lower credit utilisation improves your credit score, and having a mix of credit types (instalment loans and revolving credit) contributes positively.
6. Stay the Course
Tip: Let the loan run through its term unless there's a strong financial case to repay early.
Impact: A longer credit history feeds into credit scoring positively. Having a responsible instalment account for its full duration signals reliability.
7. Keep Monitoring Your Credit Regularly
Tip: Check your report annually for new accounts, inquiries, or errors.
Impact: Regular reviews help you spot unauthorised entries and fix them promptly. Clean credit history and proactive management improve your financial reputation.
Why These Steps Matter
Credit scoring in South Africa mirrors global standards:
- Payment history (35 %) — timely loan repayments are the strongest driver of a good score.
- Amounts owed (30 %) — balanced debt levels, especially low revolving balances, signal good financial control.
- Length of credit history (15–20 %) — demonstrating a long-standing track record boosts credibility.
- Credit mix (10 %) — having both instalment and revolving products shows maturity in credit management.
- New credit (10 %) — too many recent inquiries or new products may signal financial instability.
Real Benefits for South Africans
With a strong credit profile (typically 650+ on the 300–850 scale, or excellent above 700), you unlock:
- Lower interest rates on future loans and credit cards.
- Higher approval odds for bigger purchases like vehicles or homes.
Your first personal loan is a chance to start your financial journey on the right track. By borrowing within your means, paying on time, and monitoring your credit, you’re not just meeting an obligation - you’re building a trusted credit identity.
These small, consistent actions can open the door to better opportunities and lower-cost financing.
RCS, a reputable credit provider in South Africa, offers a variety of credit facilities, including personal loans. Applications for loans or revolving products, such as an RCS Store Card, can be done quickly and easily online, with provisional answers on your credit application in minutes.
Take the first step toward a strong financial reputation today with the right credit options tailored to you through RCS!
