What is a good credit score in South Africa and how to get one in 2022
Numerous South Africans often require credit facilities to fund various expenses, liabilities, and property acquisitions. Figuring out how much credit you can get and how to improve your credit score is quite important. Your classification as a low, medium or high-risk borrower is dependent on numerous factors. How do you determine your credit score in South Africa, and what steps can you take to improve it?
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A credit score is often a misunderstood term. While most people know that it affects their credit access in a way, some do not know how it is calculated, how to check one's score, and the methods one can use to improve theirs.
Everything to know about a credit score in South Africa?
A credit score is a numerical expression of an individual's creditworthiness based on an analysis of their credit files, history, usage, and repayments, amongst other factors. A credit score is primarily based on a debt report, information that is typically sourced from credit bureaus.
What is a good credit score in South Africa out of 705?
What is a good credit score in South Africa in 2022? Basically, a high score indicates a low-risk borrower, while a low one points to a high-risk borrower. Here is a look at the Delphi scoring system used by some credit bureaus, such as Experian.
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- 650+: Individuals with points exceeding 650 are considered extremely low-risk borrowers and can easily access loans and lower fees than medium and high-risk borrowers.
- 600 - 650: This range is for individuals with a very good rating who can access loans at good interest rates.
- 550 - 600: This range includes individuals with good ratings who access loans at acceptable rates.
- 490- 550: Individuals in this range are regarded as subprime borrowers. While they can access loans, their interest rates are typically higher than the three groups above.
- 490 and below: These individuals have poor credit rating and are considered high-risk borrowers. They often do not qualify for loans.
Keep in mind that your rating may differ from one bureau to another. This is often due to the difference in the scoring methods, information sourcing, and time of assessment.
How is a credit score determined?
Source: UGC
Numerous factors related to a person's debt behaviour determine a person's credit score. Typically, a registered bureau will compile a record of an individual's personal debt transactions, assess them, and calculate their score based on the following factors.
Payment history
This is arguably the most important determinant of a person's credit rating. A single missed payment can have a significant impact on your rating. For most bureaus, payment history typically accounts for about 35% of your score calculation.
Amounts owed
This is also known as a person's debt utilization ratio. This ratio looks at how much of your available debt avenues you're utilizing and can give a snapshot of how reliant you are on non-cash funds. This aspect of the rating accounts for about 30%.
Credit history length
This is how long you have held debt accounts. This duration accounts for about 15% of the score. The longer your history, the better your ratings.
Credit mix
Usually, individuals with top ratings often have a diverse portfolio of credit accounts. These might include car loans, credit card debts, student loans, mortgages, or other debts. The scoring models are typically designed to determine how well you can handle a diverse mix of debt. This aspect accounts for 10% of your rating.
New credit
The number of debt accounts one has recently opened, as well as the hard inquiries lenders make when you apply for credit, accounts for 10% of your final rating. Too many inquiries about new debt can hurt your score. This element accounts for 10% of your score.
Do I need a credit score?
A person's credit score is calculated based on their debt record. This essentially means that if you have no credit record, you probably do not have a score. On the face of it, this may sound like a good thing. However, it is not all positive.
Credit score loans in South Africa are advanced based on an individual's score. Without a score, lenders cannot determine your creditworthiness, meaning they have no way to decide whether to give you a loan. This makes it important to have a credit rating.
How to improve credit score in South Africa
Source: UGC
Occasionally, one may find that their score is below what they had hoped. Luckily, there are numerous simple steps one can take to improve their rating. Here is a quick look.
- Avoid reaching your limit on your credit card if you have one.
- Check your credit report for any inaccuracies and follow it up with whichever bureau did the assessment.
- Clear all your incoming bills on time.
- Ensure that all store debt, cell phone account debt, and bank loans are paid. This is especially important for outstanding loans used to purchase assets.
- Make a habit of paying more than just the minimum instalment on your current debt.
- Minimize opening new debt accounts.
- Pay all your outstanding bills.
- Pay off all pending debt.
What is the minimum credit score to buy a house in South Africa in 2022?
The minimum credit score for a home loan in South Africa is around 640. Still, a score of 600+ will give you a reasonable chance of loan approval, although this varies hugely depending on the bank you use. A score of 670+ is generally considered an excellent credit score and will significantly boost your chances of home loan approval.
While the minimum credit score for a home loan in South Africa may vary from one lender to another, those with extremely low ratings will still struggle to get loans.
How can I get a free credit score check in South Africa?
Every South African is entitled to one free credit score check per year from any of the four main credit bureaus; TransUnion, Compuscan, Experian, and XDS. One can access your personal credit reports through the My Credit Check portal. The portal references data from the Experian Sigma database. Subsequent checks attract a small fee.
What is the average credit score in South Africa?
The average credit score in South Africa is between 583 and 613.
Figuring out your credit score in South Africa is quite important and remarkably easy in the modern day. Besides the one free credit check per year, individuals can also get subsequent checks for a small fee. This rating is essential since it's the primary determinant of one's creditworthiness.
DISCLAIMER: This article is intended for general informational purposes only and does not address individual circumstances. It is not a substitute for professional advice or help and should not be relied on to make decisions of any kind. Any action you take upon the information presented in this article is strictly at your own risk and responsibility!
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Favour Adeaga (Lifestyle writer) Dr. Favour Adeaga is an author, speaker, and coach. He graduated with a degree in Mass Communication from The Polytechnic, Ibadan, Nigeria. He did his internship at The Nation Newspaper and taught diploma students in Newspaper and Magazine courses at the Nasarawa State University, Keffi. He has curated the facts and life hacks category since 2018. Dr Favour is the author of several books available on Amazon. He currently lives in Nigeria. Email: favouradeaga@gmail.com
Jackline Wangare (Lifestyle writer) Jackline Simwa is a content writer at Briefly.co.za, where she has worked since mid-2021. She tackles diverse topics, including finance, entertainment, sports, and lifestyle. Previously, she worked at The Campanile by Kenyatta University. She has more than five years in writing. Jackline graduated with a Bachelor’s degree in Economics (2019) and a Diploma in Marketing (2015) from Kenyatta University. In 2023, Jackline finished the AFP course on Digital Investigation Techniques and Google News Initiative course in 2024. Email: simwajackie2022@gmail.com.
