Understanding Your Credit Score

Unless you’re living off the grid or have no credit account of any sort, you will have a detailed credit report that is registered with the different credit bureaux. When you apply for credit, most companies will require a report from a credit bureau to determine if you are a risk when it comes to giving you credit.

Why do I need a high credit score

More or less, half of South Africans have impaired credit scores, however, each lender interprets credit scores differently. It’s important to know that, universally, the higher your credit score, the lower you are as a risk to lenders – this means that you will get better interest rates when it comes to borrowing money.

How is my credit score determined?

The score is based on a few factors, including:

  • Credit application history
  • Payment history
  • Age of accounts
  • Number of late payments
  • The length of your credit history
  • Outstanding debt
  • Types of credit you’ve had

Basically, a credit score is a number lenders use to see the likelihood of whether or not they will be repaid on time if they give you any form of credit. The score ranges from 330 to 830 and is more or less broken down as follows:

*750 + Excellent – you’ll receive excellent rates and packages from a debtor

*720 – 749 Very good – you’re a safe borrower and can get almost any amount you request

*680 – 719 Good – you can apply for almost any amount but there is no guarantee you’ll get approval

*620 – 679 Poor – you will struggle to get a loan and even if you do get one you’ll pay high rates

*619 below Very poor – it is almost impossible to get any credit

Every South African citizen can request one free credit check every year. Even though the lack of credit makes for a higher score, you have to use credit (responsibly) to have a score. This means you must pay your installments on time – try to pay more than the minimum if possible – to show that you are a good debtor.

What happens if I can’t pay back debt?

Have you taken out too much credit? Are you unable to pay back your creditors? This can be reversed with the help of a debt counselling company. If you are struggling with debt, contact Debt Rescue for assistance.

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