2026: the year to master your credit decisions

South Africa’s credit landscape just offered a rare glimmer of hope: a 14% year-on-year improvement in default rates according to Experian’s latest Consumer Default Index (CDI). However, this seemingly positive statistic is a deceptive illusion, stemming more from tightened lending practices than from a genuine surge in consumer financial strength. As the echoes of festive spending fade, 2026 is poised to expose a hidden vulnerability, making this a critical moment to confront our credit choices head-on and build resilience for the real financial pressures set to emerge.

Despite this technical improvement, demand for credit remains very high, surpassing pre-COVID levels, indicating many households are still struggling to manage daily expenses. This context underscores the critical need for a renewed credit mindset. To ensure 2026 becomes your most credit-smart year yet, focusing on these actionable steps can make a profound difference:

Know your financial starting point

• Check Your Credit Score: The cornerstone of effective financial management is a clear understanding of your current credit position. Regularly checking your credit score is paramount, as it allows you to monitor fluctuations, identify areas for improvement, and gauge the impact of your financial actions. This is especially important when the broader economic landscape is complex, as highlighted by the CDI. Up by Experian, a free web-based app, is available to easily view your credit score and make informed decisions. Knowing your score is the first step towards taking control.

• Effective Credit Control: With the festive season now behind us, it becomes vital to prevent any accumulation of unnecessary debt. The CDI highlights Black Friday and festive spending as a source of long-term financial drag. Historical data shows temporary dips in default rates often surge in Q1 and Q2, as purchases translate into later stress. Proactive credit control now is crucial to avoid becoming part of this statistic.

Concerningly, even financially stable households (FAS Groups 1, 2, and 3) show higher credit card limits and usage, suggesting reliance on credit for living expenses. The temptation to use these stretched limits for promotional purchases is immense, creating a risky situation. A disciplined budget and prioritising high-interest debt repayment are crucial for preventing unmanageable debt and alleviating financial pressure.

• Achieving a Good Credit Score: Assess your past year's spending habits – what worked, what didn't? With R2.33 trillion in outstanding debt in South Africa, individual financial vigilance is paramount. Set realistic credit goals for 2026 – debt reduction, improving payment history, or building savings. These goals form your roadmap for smarter credit choices. Remember, a good credit score is a powerful tool unlocking better financial opportunities and favourable lending terms.

• Addressing Low Credit Score Loans: The CDI reveals widespread reliance on credit to manage living costs, even among financially stable consumers; multi-banked individuals often face higher financial distress. If you find yourself in need of credit but have a lower credit score, you might encounter low-credit-score loans. These types of loans often come with higher interest rates, stricter terms, and sometimes even hidden fees, making them a more expensive and potentially riskier option. Consistent positive actions, however, can yield significant improvements. Demonstrating reliable payment behaviour and making a conscious effort to manage existing credit responsibly is key. By actively working to improve your credit standing, you will progressively understand how to qualify for better financial products with competitive interest rates, moving away from potentially riskier credit options.

With proactive planning and consistent credit control, even a challenging credit score can improve considerably. Start implementing these habits now, and by mid-year, you will likely find yourself in a much stronger financial position, ready to navigate the rest of 2026 with greater confidence and peace of mind. Making smart financial decisions today will be instrumental in building a resilient and stable financial future. Let this be the year you take charge of your financial future.

* Van Jaarsveldt is the chief strategy and innovation officer at Experian.

PERSONAL FINANCE