As National Debt Awareness Month has just drawn to a close, many of us are feeling the strain of what’s often referred to as the annual ‘debt hangover’. The pressure typically builds after December’s festive overspending and January’s back-to-school expenses, so many households have to lean more heavily on credit to bridge that financial gap.
According to the Sanlam Credit Confidence Index, 53% of millennials on the platform are already directing more than half of their monthly income towards debt repayments.
Afua Darko, Business Head at Sanlam Credit Solutions, notes that while this period can feel overwhelming, it is the perfect time for a financial reset. “Today might feel difficult, but tomorrow will be better, as long as you take practical steps to recover, rather than hoping it passes on its own,” she says.
She explains that recovery starts with understanding exactly what lenders see when they pull your credit report. While most consumers know that missed payments are bad, there are several subtle, everyday habits that quietly erode credit scores.
Hidden habits that damage your credit score
1. Applying for multiple credit products at once
In the digital age, it takes minutes to open several browser tabs and submit loan applications to multiple lenders simultaneously, to see who offers the best deal.
However, every single application triggers a ‘hard enquiry’ on your credit report, regardless of whether you are approved, declined, or choose not to take the product. To lenders and credit bureaus, frequent applications signal financial distress and lower your credit score.
The fix: Compare rates and terms online by doing thorough research first, rather than formally applying at a lender just to see which rate you may qualify for.
2. Maxing out your credit utilisation
Even if you pay your minimum instalments on store cards or credit cards on time every month, consistently using 100% of your available limit is a red flag to lenders.
“Using your maximum credit limit every month indicates to lenders that your salary is not enough to get you through the month, and you are using credit as an extension of your income,” Darko explains. “It means you are often just shifting money around rather than paying off the capital.”
The fix: Aim to keep your credit utilisation (the amount of credit you use compared to your total limit) well below your maximum threshold.
3. Skipping the wrong payments to cover others
When money is tight, it can feel logical to skip a debit order on one account to cover another. Darko warns that skipping a payment will always do more harm than good, and you should always aim to pay at least the minimum.
If you absolutely have to prioritise during a tough month, Darko recommends taking a strategic approach:
Pay secured debt first (debt linked to an asset):
This includes repayments like your home loan or vehicle finance. This debt is secured because the lender can repossess the asset (your home or car) if you fall too far behind. If you prioritise payments on these accounts, you’ll be doing yourself a favour in the long-run by mitigating risk and avoiding asset repossession by lenders.
Pay unsecured debt (credit not backed by an asset):
This includes store accounts, credit cards, and personal loans, where you borrow money without providing an asset as security. Here, the lender trusts you’ll repay the debt based on your credit history, income, etc. rather than on an asset like a house or a car being offered as surety. This type of credit should still be paid (at least the minimum); but they generally carry a lower immediate risk than secured debt or lapsed insurance policies.
Pay your insurance products:
When faced with financial difficulty, people often make the mistake of skipping payments or cancelling their insurance products like life, disability, or medical cover. “If you stop paying a R200 premium that might have saved you R200 000 in the event of an unforeseen medical emergency, you may be forced to take on significant debt later and could end up in debt counselling because you didn’t have cover.”
How to track your progress and protect your profile
Darko says, “Debt is not inherently bad, but debt becomes harmful when it is used without a plan or is managed irresponsibly. Problems arise when debt is taken on without considering affordability or the long-term impact on your finances. For example, credit can help you buy a home, start a business, or handle emergencies.”
She highlights the following practical steps to build healthy habits and track your progress:
Consolidate your view:
Platforms like Sanlam Credit Solutions offer a free credit dashboard that pulls all your agreements into one unique, easy-to-read view of your financial position.
Check your credit report:
Checking your credit report regularly gives you an exact snapshot of what lenders see, including your open accounts, utilisation ratios, and payment history.
Pay more than the minimum:
Payments that are in excess of the required minimum amount help to reduce your interest, shorten your repayment term, and improve your standing with lenders, leading to better rates on future credit.
Speak to a credit coach:
If the picture looks overwhelming, consider getting help. A digital chatbot coach or a human credit coach can assess your unique situation and recommend a personalised path to reduce debt.
“The key is awareness,” Darko concludes. “When you understand the habits that are quietly dragging your score down, and take small steps to change them, recovery is possible and often happens faster than you would expect.”
Ends.