Whenever you apply for any form of credit, the lender will inspect your credit report. If your credit score is bad, you’ll be considered a high-risk borrower. You’ll either not be granted credit or obtain it at a higher interest rate. If your credit score is good, you’ll obtain credit at a lower interest rate.
By registering with JustMoney CreditSav, you will gain access to your free credit report. This report will inform you of your credit score, ranging from Bad to Average to Good, numbering from 1 to 1000. The score takes into account your outstanding debt, both long-term and short-term, and the number of accounts you have open. It will also indicate whether there are any judgements against you, and note if you are receiving debt counselling. In addition, it will show you your debt-to-income ratio, and how you measure up on a scale of 0% to 100%, compared with other South Africans.
Click here to register. If you're already registered, simply log in and follow the prompts to find your credit score.
What factors affect your credit score?
Your credit score is influenced by the following factors:
- Payment history: If you don’t pay your accounts on time, your credit score will be negatively affected. Even one missed payment could have an impact.
- Several hard enquiries: Every time your credit score is checked, a note is made on your credit report. These notes are classified as hard or soft enquiries. The former is when a creditor, such as a bank, requests your credit score, while the latter is when you check your own credit score. If you have too many hard enquiries, your credit score will drop.
- Newly opened accounts: If you decide to open several new credit-bearing accounts in a short period, this will count as a red flag on your credit report. This is often a signal that you’re desperate for cash. It may also be difficult to balance a range of new accounts.
- Having too much debt: Your debt-to-income (DTO) ratio should never be over 40%. This means that you should never pay more than 40% of your income towards your debt. If you do, creditors will be concerned as to whether you will be able to settle your instalments at the end of each month.
Do you have a good credit score?
When analysing your credit report, you’ll notice that you’re assigned a score. This number is a reflection of your creditworthiness and it will determine whether future creditors will be able to trust you.
The CreditSav rating categories are as follows:
- 901 - 1000: Excellent
- 851 - 900: Good
- 801 - 850: Okay
- 601 - 800: Needs work
- 3 - 600: Not good
- 1 - 2: Not enough information to score
What if you don’t have a valid credit score?
If you have never taken out credit, your credit score may range from 1-2. This means that there is not enough information in the credit bureaus to score you. In order to establish or build your credit score you need to have at least have one open account. There are three ways most people establish their credit scores:
Credit/store card: Opening a credit card or store account is a good way to establish payment history. Make sure that you pay your outstanding balances on time.
Let your landlord help you: If you’re renting, you can ask your landlord to report your payment history to the credit bureaus.
Activate your bank credit facility: Many banks offer overdraft facilities. Activating this will help you establish your payment history.
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