Building Credit from Zero Without Getting Trapped

Photo: Mikhail Nilov / Pexels

When you start earning, you'll hear two pieces of advice that seem to contradict each other:

• "Stay away from debt."
• "You need to build a credit record."

Both are right. The way to reconcile them is to use a small amount of credit deliberately, in a way that builds a record without costing you much. Here's how.

Why having no record causes problems

When you apply for credit, whether that's a phone contract, a car loan or eventually a home loan, the lender checks your credit report to see how you've handled repayments before.

If you've never had credit, there's nothing to check. Smart About Money calls this having a "thin file". It quotes a credit bureau executive saying that people with no recent credit history generally have no credit score, or a score that suggests they're high risk. You might earn well and still be declined simply because there's no track record.

How credit reports and scores work

Every month, lenders report how their customers are repaying to credit bureaus. The bureaus combine this into your credit report and calculate a credit score. Scores differ between bureaus, and each lender sets its own rules for approving credit.

Your report is essentially a record of the credit accounts you have and how well you've repaid them, including any missed payments.

Step 1: Get your free credit report

Under the National Credit Act, you're entitled to a free credit report once a year. You can request it directly from the credit bureaus.

Check it for:

• accounts you don't recognise, which can be a sign of identity fraud
• incorrect information, such as debts marked unpaid that you've settled
• your personal details

You can ask the credit bureau to correct or remove information that's wrong.

Step 2: Use one small account, and pay it off in full

Smart About Money says young earners are often advised to open one small credit account, such as a store card or a credit card, and manage it carefully. The method:

1. Keep the limit low. You're building a record, not borrowing.
2. Only buy things you'd buy anyway, such as groceries or toiletries you've already budgeted for.
3. Pay the full balance before the interest-free period ends. Smart About Money says that's up to 55 days on a credit card and up to six months on some store cards.
4. Set up a debit order so you never miss a payment by accident.

Done this way, the account costs you little or nothing and adds a good repayment month to your record each time.

Store cards: useful until you carry a balance

Store cards are usually easier to get than a bank credit card, which makes them a common first account. The catch, as a credit bureau executive told Smart About Money, is that if you don't pay within the interest-free period, the interest is generally very high.

Under the NCA, credit facilities such as store cards and credit cards can charge up to the repo rate plus 14% a year. From 25 September 2026, that's up to 21.25% a year, plus any fees allowed by the regulations. Keep a balance on a few store cards and that cost adds up quickly.

Rule of thumb: one or two accounts that you pay off in full. Not five that you pay a minimum on.

What else lenders look at

Your credit score isn't the only thing a lender considers. According to an FNB credit executive quoted by Smart About Money, banks may also consider:

• how you run your transactional and savings accounts with them
• whether your debit orders go through without bouncing
• whether you're building up savings
• your qualifications, especially when you're young

So having your salary paid into the bank you'd like to borrow from one day, and running that account well, helps too.

How long it takes

Building a solid record takes time. An FNB credit executive quoted by Smart About Money says that keeping a credit account in good standing, paid in full every month with no missed payments over 12 months, is the "gold standard" for building a credit score and history.

You may see figures such as "a score of around 650 gets you better interest rates." Score bands differ between bureaus and lenders, so treat any figure like this as a rough guide, not a cut-off.

Warning signs you're borrowing just to get by

Credit becomes a trap when it stops being a tool and starts paying for everyday life. Watch for:

• using credit for groceries or transport because your salary has run out
• paying only the minimum on any account
• opening a new account to pay off an old one
• borrowing from mashonisas, which Old Mutual found rose from 12% to 19% of working South Africans in a year
• falling behind on any repayment. 1 in 4 working South Africans surveyed had done so on a personal loan

If you recognise several of these, act early. Contact your lenders before you miss a payment. Ask whether a revised repayment arrangement is possible. If your debts have become unmanageable, the NCA provides for debt counselling, a formal process that restructures what you owe into repayments you can afford.

The short version

Use one small account, pay it off in full every month by debit order, and check your free credit report every year. Do that for a year and you'll have a credit record working in your favour, without having paid much interest to build it.