Want to know if your credit score is good or not? Get to know what are South Africa’s credit scores and how it impacts you!

You already know that building a good credit score is an important step to unlock financial opportunities – from securing loans with favorable interest rates to qualifying for greater credit cards-, so let’s talk about what a good credit score is in South Africa.

We are going to help you understand how your score works, while also offering you tips on how to handle it better, in order to improve your range. Also, if you want to check out more financial tips on our website, you can click on this link!

What is a Credit Score?

Simply put, it is a three-digit number generated by credit bureaus based on your past borrowing and repayment behavior, as a way to stablish your creditworthiness. There are are four main credit bureaus in South Africa – Experian, TransUnion, Compuscan and XDS. They collect information about your credit accounts, including loans, credit cards, debts, and even cellphone contracts, and use it to calculate your score.

How Do Credit Scores Work in South Africa?

• Payment History: it reflects your track record of making timely payments on your debts. Late payments and defaults significantly impact your score negatively;
• Credit Uutilization Ratio: it analyzes the amount of credit you’re using compared to your total credit limit. Ideally, you should keep your credit utilization ratio below 30%. Maxing out your credit cards will hurt your score;
• Length Of Credit History: the longer your credit history, the better. Having a proven track record of managing credit responsibly over time positively impacts your score;
• Credit Inquiries: every time you apply for a loan or credit card, a credit inquiry is made. While a few inquiries won’t significantly affect your score, frequent inquiries can raise red flags for lenders;
• Public Records: adverse public records, such as judgments or defaults, can damage your credit score.

What Is A Good Credit Score in South Africa?

The credit score range in South Africa typically falls between 0 and 999:

• Excellent: Above 767
• Good: 681 to 766
• Favourable: 614 – 680
• Average: 583 – 613
• Bellow Average: 527 – 582
• Unfavourable: 487 – 526
• Poor: Bellow 486

How Does Credit Score Affect You?

• Qualifying for Loans: a good credit score increases your chances of getting approved for loans, such as mortgages, car loans, and personal loans. Additionally, a higher score translates to lower interest rates, saving you money in the long run;
• Securing Favorable Insurance Rates: insurance companies often consider your credit score when calculating your premiums. A good credit score can lead to lower insurance rates for your car, home, and even life insurance;
• Renting an Apartment: some landlords in South Africa may use your credit score as part of the tenant screening process. A good credit score can improve your chances of securing a rental property;
• Access to Better Services: having a good credit score can allow you to access certain services, such as getting a cellphone contract without a deposit or a higher limit credit card.

What Credit Score Do You Need to Get a Loan in South Africa?

The minimum credit score required for a loan in South Africa varies depending on the lender and the type of loan. However, generally, you need a score between 610 and 640 to qualify for a home or personal loan. If you have a score higher than 681 you tend to secure higher loan amounts and better loan terms.

Tips to Increase Your Credit Score

Building and maintaining a good credit score requires consistent effort. Here are some things you can do to help you improve your score:

• Make Timely Payments: pay your credit card bills, loan installments, and other debts on time every month. Even a single late payment can significantly impact your score. Set up automatic debit orders if necessary to ensure on-time payments;
• Maintain a Low Credit Utilization Ratio: don’t max out your credit cards. Aim to keep your credit utilization ratio below 30%. If you have multiple credit cards, consider consolidating them into one card with a lower limit to manage your credit usage effectively;
• Build a Long Credit History: if you’re new to credit, consider getting a small starter credit card and use it responsibly, making timely payments to establish a positive credit history;
• Become an Authorized User: consider becoming an authorized user on a family member or friend’s credit card with a good payment history. Their positive payment behavior can be reflected on your credit report, boosting your score;
• Limit Credit Inquiries: don’t apply for numerous loans or credit cards simultaneously. Every application triggers a credit inquiry, which can slightly lower your score. Space out your credit applications and only apply for credit when necessary;
• Review Your Credit Report Regularly: obtain a copy of your credit report at least once a year. Check for any errors or inaccuracies and dispute them immediately with the credit bureaus;
• Pay Off Existing Debt: reducing your overall debt burden can positively impact your credit score. Focus on paying down high-interest debts first and develop a plan to manage your debt effectively.