What is a Credit Score?

When you go and apply for a payday loan or a home loan, the creditor will assess a multitude of factors to see if you qualify for the loan. The first step is seeing if you can afford the loan, for this the creditors will look through your income and expenses to judge whether you can comfortably afford the repayments. After this, they will look at your credit score.

Your credit score in South Africa is a vital factor in the creditors assessment of you. But what is a credit score in South Africa and what it is made up of? Can you improve your credit score?

Credit Score South Africa Explained

In South Africa, there are two main credit bureaus that provide credit scores. These are Experian and TransUnion. Both provide you with a free credit score at least once a year, so it is wise to check your credit profile to notice any discrepancies.

Rather than each creditor having to look through all your credit accounts, look for defaults and analyse your credit history, the credit bureaus condense all this information into one number. The bureaus work with all the creditors in the country to gain data about how much you owe, how much credit you have available and other credit information. This allows them to provide new creditors with an up to date credit score.

How is a Credit Score Calculated in South Africa?

Each bureau varies slightly, but there are some factors that play a major role in your credit score. They are:

Court Judgements – A court judgment is when a court issues an instruction for you to pay your outstanding debt.

Defaults – A default is when you fail to pay a monthly credit payment.

Length of Credit – The longer you have had credit the better as it gives the creditors more data to assess your history and patterns.

Credit Utilisation – How much credit you are using, as compared to what you have available, is referred to as credit utilisation. For example, if you have a credit card with a limit of R20 000 and you are using R2000 if the R20 000 limit, your credit utilisation is 10%. The lower the better, but usually less that 20% is classified as good. If you have several enquiries over a short period of time, this can be seen as negative behaviour.

Credit Enquiries – Every time you put in a credit application, a creditor will put in an enquiry to get your credit information, after you have given permission.

How to Improve Your Credit Score?

Improving your credit score is not as difficult as it sounds. The first step is to get your credit profile and understand where you are. Then identify areas to work on and begin work on them.

What is the Average Credit Score in South Africa?

While credit bureaus differ slightly in their scores and score layout, scores are generally between 300 and 850.

  • If your score is between 300 and 579, it is classified as a low score.
  • A fair to good score is between 580 and 669
  • A great score is anything above 700

According to our sources, the average credit score in South Africa is around 580. However, we do not have access to the direct data and are relying on other sources.

Credit Score App South Africa

A great way to keep your credit score up is to constantly be checking your credit score and identifying ways to improve. It would be great to have an app on your phone that could give you your credit score in an easy-to-understand format on a monthly basis.

ClearScore is this app! ClearScore is a mobile app available on iOS and Android, it is also 100% free to use with no pop-up ads. The app provides your credit score once a month and gives you tips to improve it. The app has also linked in with many credit providers to make it easy to help you find credit.

While a credit score may seem like a confusing number, it is actually much easier to understand when you break it down. Improving your credit score will take some work, but that work is made easy with ClearScore.