Part 1 of 2:
Lets get right into it. Here are a few statements that will help you understand your credit score better.
-Just as your Maths mark can inform how good you are at Maths, your credit score informs how good you are at managing debt repayments. It is an indicator of the chance that you will repay your debts on time.
-It is calculated by a Credit Bureau. There are 4 major Bureau’s in South Africa; namely TransUnion , Experian, Compuscan and XDS. They each determine their own credit score for you based on your credit behaviour.
-When you apply for credit (e.g. a home loan or a cell phone contract), the credit provider will look at your credit score (from one or more of these Bureaus) and, based on their own internal criteria, determine whether they will grant you credit –and at which terms they will do so.
– The score typically ranges from 300 to 999 – the higher the better. It can also increase and decrease based on your credit behaviour (more on this below)
The Table below can assist you in determining how your credit score is viewed by credit providers. (Since each credit provider will have its own criteria, this may differ from provider to provider.) Note: The average South African has a score of 618 according to Compuscan.
|750+||Excellent||You are the ideal client. Credit providers will even offer you special interest rates that are lower than the norm.|
|720 – 749||Very Good||You are a safe bet for credit providers. You will be accepted for most credit you apply for.|
|680 – 719||Good||You qualify for most options. There’s no guarantee that you will get approval though.|
|620 -679||Poor||You will most likely struggle to get credit from most providers. If you do, it will likely be at a higher interest rate. Try to work on improving your score before getting a mortgage loan.|
|619 and below||Very Poor||You will most likely not qualify for any credit.|
According to the National Credit Act every South African is entitled to one free credit report every 12 months. You can apply for these at any credit Bureau.
If you find yourself on the lower end of this spectrum, do not despair, it is not permanent. There are ways that you can improve your score. We tackle this in part 2 of credit score; how to improve your credit score. (This is a link by the way :))