Have you ever been declined for a general loan or vehicle finance and just didn’t know why?
Have credit providers ever referred to your credit score and you didn’t really pay much attention to it?
If you think that your credit score is just a number at a credit bureau which carries no weight in how institutions or organisations view you – you could not be more wrong!
In a nutshell, a credit score is a number that evaluates your creditworthiness and is based on your credit history.
The higher the score, the more financially trustworthy a person is considered to be.
The information in your credit report is used by most credit and service providers as an important contribution to the development of their own credit risk assessment of you.
This, along with your employment history, your income and affordability assessments, as well as the type of credit for which you are applying, will affect the outcome of your credit application.
This is particularly important for when you want to apply for that all-important home loan.
Your credit score is calculated using a formula that evaluates how well or badly you pay your bills, how much debt you carry, and how all of this stacks up against other borrowers.
In the end, a single number tells you what your credit report says about how you manage your skuld.
So what exactly does that number mean?
Generally, the higher your score, the better.
Scores range from 0 to 999 or from poor to excellent.
Let’s go through them:
- EXCELLENT: 767 – 999
- GOOD: 681 – 766
- FAVOURABLE: 614 – 680
- AVERAGE: 583 – 613
- BELOW AVERAGE: 527 – 582
- UNFAVOURABLE: 487 – 526
- POOR: 0 – 486
Sebastien Alexanderson, CEO of National Debt Advisors, says that many people only check their credit score when it is too late, especially after a home loan, vehicle finance, personal loans or request for credit has been turned down.
“SA consumers are being reactive as opposed to proactive. Just like it is important for us to be on top of our physical health, so we should strive to be fully informed of our financial health as well,” says Alexanderson.
According to Transunion, one of South Africa’s leading credit bureaus, fewer than 5% of consumers make use of the legislation which entitles them to obtain their credit report free of charge from every credit bureau, every year.
For a free credit report visit: