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Understanding your credit score

By Isabelle Coetzee

Your credit score determines whether you’ll be approved for a personal loan, vehicle finance, or a new credit card. It also impacts the interest rate you’ll be offered on each of these.

But how do you know whether you have a good or bad credit score? The first step is to know that there are four active credit bureaus in South Africa:

Each of these credit bureaus gather information from creditors about your reliability with credit. Either the creditor will volunteer the information, or the bureaus will seek it out.

For example, if you have an account with Edgars, the store will note whether you pay your account on time and in full and it will send this information to the credit bureaus.

READ MORE: Credit Score: The value of ‘opening an Edgars account’.

Not all creditors will submit this information on a regular basis. However, they will absolutely inform the bureaus if you default on your payments.

You are entitled to one free credit report from each of the credit bureaus per year. You can reach out to them by visiting their websites and informing them that you’d like your credit report.

Once you receive it, you may be faced with a new challenge: What do the numbers really mean? To help simplify this, we’ve outlined the basics below.

  • 650+: Excellent credit
  • 600 – 650: Very good credit
  • 550 – 600: Good credit
  • 490 – 550: Sub-prime
  • 490 and below: Poor credit

Some credit bureaus will define these brackets differently, but the above figures are a good indication of where you stand with your creditworthiness. Your aim is, of course, to achieve a score of 650+, which is considered “excellent credit”.

These scores are based on the number of hard enquiries made to your credit score, your credit history, the amount you owe, the age of your accounts, and whether any legal action has been taken against you for not meeting your credit agreements.

If you have a sub-prime or poor credit score, new creditors will be hesitant to take you on as a client, and if they do decide to take this risk, you will likely receive an incredibly high interest rate. Contrary to this, if you have a good, very good, or excellent credit score, creditors will be comfortable lending to you and you will receive a normal or good interest rate.

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