How to read and improve your credit score

By Staff Writer

A major concern is that the average credit-active South African is a high risk borrower, according to credit information provided by Compuscan.

According to Compuscan’s data, the average South African borrower is 42 years old, has a predicted income of R13 147 and a credit score of 618 (high risk).

“Furthermore indicating the situation at hand, 41% of the 22.5 million credit-active consumers in the country are considered very high risk borrowers and an additional 15% of credit-active consumers are considered high risk borrowers,” said Compuscan.

“As is revealed by these statistics, those that are considered high, and very high risk borrowers together make up more than half of all credit-active consumers in South Africa. While this is alarming, what is equally concerning is that many of these consumers may not even know what a credit score is, what their own credit score is or how a poor score is negatively impacting their ability to obtain credit,” said Frank Lenisa, Director at Compuscan.

Compuscan has five score bands, which determine your risk level. They are:
·         605 or less = Very High Risk
·         606 – 621 = High Risk
·         622 – 641 = Average Risk
·         642 – 667 = Low Risk
·         667 or more = Minimum Risk

This guide will look at what a credit score, and credit report are, as well as a general example of what you will find on your credit report.

Example of a credit report
The Credit Bureau Association (CBA) says that each account will be listed under this section and your payment history will be shown. Every report is different, but it will look something like this:

     Standard Bank Master Card

Account Number 1234567891234567 Current Balance R 2,623.71
Account Status Open or current Overdue Amount R 0
Date Opened 2013-07-01 Payment Frequency Monthly
Monthly Installment R 423.52 Payment Status Current
Account Type Credit Card Last Payment Date 2013-11-25
Opening Balance R 10,000 Status Date 2013-11-30


Every account will also show a payment profile, which looks something like this:

      2013 2014  
Sep Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
ND 0 0 0 0 0 1       2 3       4       L 0 0 0 0 C


The specific report will provide you with a guide explaining what each number or symbol means – for example:  O = up to date; 1 = 30 days no payment; 2 = 60 days not payment; L = handed over for legal collections, C = closed; etc.

What is a credit report?
The CBA says that your credit report is a document that shows all the credit or accounts you have and how well you pay your accounts.

It includes your credit score, your personal information (your full names, ID number and address), your property information, any judgments or court orders against you, and all enquiries that have been made on your profile.

Compuscan has created a simple and user-friendly personal online credit portal called My Credit Check whereby South African consumers with valid identity numbers are able to monitor the complete record of their credit history, their borrowing habits, re-payment trends and contact details.
Information is clearly grouped and thus you are able to easily deduce what data has the biggest impact on your credit score and finances.

Compuscan says that there is important information that you should take note of on your credit report, which includes the following:
•                    Whether all personal information is up to date, including your address, contact details, etc.
•                    Whether any accounts have been opened fraudulently in your name
•                    Whether any enquiries reflect on your credit report
•                    Whether any accounts that you closed reflect as open on your report
•                    Whether any accounts that are still open reflect as closed on your report
What is a credit score?
Your credit score is a value that is calculated based on how well you pay your accounts. A “good” credit score depends on the model that is used by the credit provider.
Not every credit provider calculates this in the same way. The credit bureau does not decide whether you qualify for credit – this decision is made by the credit provider based on your credit score which is determined by your own actions and payment history.

What is a credit bureau?
You get your credit report from a credit bureau. A credit bureau is a company that receives, stores and reports information on how you manage your credit, including store accounts, loans and credit cards.
Credit bureaus must operate in terms of the National Credit Act and must be registered with the National Credit Regulator.

What does the information on your credit report mean?
Not all credit reports look the same but all of them include similar information.

A report is made up of different sections and normally includes the following information:

A.      Personal information
Your personal details, including your name and ID number.

B.      Address and telephone details
The most recent contact detail that the credit bureau has for you.

C.      Employment information
A list of all known employers where you have worked.

D.      Enquiry information
All the providers who have requested your credit report.

E.       Property information
A list of the properties that are registered in your name.

F.       Directorship information
A list of the companies where you are registered as a director.

G.     Your credit summary
This section is a summary of your current credit commitments. In an example of a credit score obtained from Experian, this section includes: : the number of accounts that a person has, the number of enquiries, judgements, notices, defaults and collections, as well as the total balance exposure, the total monthly exposure, and the total overdue amount.
To read how you can improve your credit score, click here
For more information on how to analyse your credit report, click here

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