South Africa's credit default rates show improvement, but beware of the hidden risks

In a landscape often marred by financial unpredictability, South Africa's recent credit report from Experian offers a rare glimmer of hope. The Consumer Default Index (CDI) has revealed a noteworthy 14% year-on-year drop in default rates, suggesting an improvement in consumer credit behaviour. However, a closer look at this statistic unveils a more complex reality — one driven not by newfound financial stability among consumers but rather by tightened lending practices and a stringent credit environment, says Jaco van Jaarsveldt, Chief Strategy & Innovation Officer at Experian.

As the lingering effects of festive spending subside, the looming year of 2026 threatens to expose deeper vulnerabilities within the financial landscape, he says. Households, many of which are still grappling with soaring living costs, are faced with the critical need to confront their credit choices and build resilience before the true financial pressures become evident. The stakes have never been higher, making a proactive credit mindset essential, says van Jaarsveldt.

Understanding the soil of financial health

Despite a technical improvement in default rates, the demand for credit continues to soar, exceeding pre-COVID levels. This discrepancy is troubling and flags a concerning trend: many consumers are still struggling to manage their basic needs. In light of this, a fresh approach to credit management is imperative, says van Jaarsveldt. Here are several actionable steps that can help steer individuals and households toward a credit-smart future in 2026:

• Know your financial starting point: Start by assessing your credit health. Regularly checking your credit score is crucial as it allows you to track your financial standing and make informed choices. Tools like Up by Experian offer free access to your credit report, assisting in recognising areas that require attention.
• Effective credit control: With the festive season behind us, managing unnecessary debt is essential. The CDI indicates that high spending during Black Friday and the holidays can lead to long-term financial repercussions. The data suggests that while default rates may temporarily dip, they often rebound sharply in the early months of the year. Avoid becoming part of this trend through disciplined spending habits and prioritising the repayment of high-interest debts.
• Achieving a good credit score: Reflect on your financial habits over the past year. With R2.33 trillion in outstanding debt in South Africa, every individual must cultivate financial vigilance. Set realistic credit objectives for 2026 — whether it's reducing debt, improving your payment history, or building savings. Such goals will serve as your roadmap to better credit choices.
• Addressing low credit score loans: The CDI highlights a reliance on credit, with even financially stable consumers experiencing higher credit card limits. While the temptation to leverage such credit may be significant, patience and consistent positive actions are vital in upgrading your financial standing. Aim to show responsible payment behaviour and manage your existing credit prudently. Over time, you may qualify for better loan terms with lower interest rates — steering clear of more expensive, high-risk alternatives.

While the CDI presents a superficially encouraging picture, true resilience in South African households will stem from proactive credit management and informed decision-making, says van Jaarsveldt. By adopting these strategies now, individuals can emerge better equipped to tackle the challenges that lie ahead in 2026. 

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