This article is a one-stop guide for understanding your credit score; from why, how, and when it should be checked, to how it can be improved.
24 August 2023 · Fiona Zerbst
Your credit score provides a snapshot of your financial behaviour at any given time. We explain what your credit score consists of, how it works, and how to improve it.
Tip: A favourable credit score makes it easier to access financial products. Check your credit score here.
A credit score is a benchmark that allows lenders to establish whether they are willing to take the risk they run when lending to you. The higher your score, the less of a risk lending to you will be.
Your credit score is derived from your credit report, which provides a record of your credit activity. This information is supplied by credit bureaus to credit providers and other service suppliers, to enable them to make informed lending decisions, says Dee Chetty, vice president of product solutions at TransUnion Africa.
It’s important to note that while significant, your credit score is not the only factor in determining loan qualification. Loan affordability and other factors also influence loan application success.
By checking your credit score, you are keeping your finger on the pulse of your financial health. There are various options for keeping tabs on your score, and these are outlined below.
There are more than 50 registered credit bureaus in South Africa. The four main credit bureaus are Experian, TransUnion, VeriCred, and Xpert Decision Systems (XDS).
Credit bureaus make credit score calculations from data supplied by banks, retailers, insurers, telecommunications companies, and other organisations.
Because they interpret data differently, the way credit bureaus score consumers also differs. Varying weightings are assigned to factors that relate to your credit behaviour, including your payment history, how many accounts you have, and how much you owe.
Your credit score determines whether you’re “creditworthy”, meaning that you are able to service a debt if granted credit. This in turn determines how sizeable a loan you’re likely to secure, and the interest rate you can expect, says Chetty.
“A ‘good’ credit score helps to secure preferential rates and terms on a diverse range of lending products, such as store cards, retail loans, home loans or vehicle finance,” he says.
According to Chetty, South African consumers can access one free credit report from a credit bureau every 12 months. Simply visit the credit bureau’s website and follow the prompts.
Experian’s web-based app, Up, allows consumers to check their scores and download their full credit report as many times as they wish, for free. Checking on this app incurs fewer data charges than would be incurred on a native app, notes Ans Gerber, head of data insights at Experian South Africa.
TransUnion offers TrueCredit, a service that alerts you of any credit score changes, for a R40 monthly fee. The app also gives you access to your credit score, which you can check as regularly as you wish.
VeriCred has partnered with JustMoney to offer a complimentary credit score portal. Products and services are also available to subscribers. As with the methods noted above, simply checking your credit score via the portal does not affect it in any way.
As credit scores vary from one credit bureau to the next, there is no one organisation that is more “reliable” than another. However, it's important to check the accuracy of the information held by credit bureaus.
“Check your credit report carefully for inaccuracies, such as accounts you don’t recognise, or incorrect information about late payments,” Chetty recommends.
“Disputing this kind of inaccurate information, and getting it removed from your credit report, can improve your credit health,” he says.
The easiest way to check your credit scores is via your cell phone, by accessing a credit bureau website, or a credit score portal, such as the JustMoney platform. Once you have subscribed, you can log in to check regularly, quickly and easily.
Once you have obtained your credit report, examine it to ensure that the following information is correct:
Because credit bureaus have different scoring models, there is no single measure of a “good” score, says Gerber.
What is universally true, however, is that a higher credit score shows that you are more creditworthy. The aim, therefore, is to increase your score through responsible credit behaviour.
Credit bureaus can offer vastly different scoring ranges – for example, a TransUnion credit score ranges from 0 to 999, while Experian scores a consumer anything from 1 to 657 and above.
At TransUnion, an excellent score is 767-999, a good score 681-766, and a favourable score 614-680.
“Anything above 633 is considered “good” at Experian, and your score’s really great if it exceeds 657,” notes Gerber.
The better your repayment behaviour, the better your credit score will be. A good score simply means you’re low risk to a lender because you manage your debt responsibly and are unlikely to default on payment.
An average credit score is the median between the lowest and highest scores.
Looking at Experian’s range, anything between 598 and 633 would be deemed “average”, says Gerber, while an average score at TransUnion is anything from 583 to 613.
“As a consumer, you would benefit more from having a good or even great score, as this would put you in a position to not only qualify for credit but to negotiate lower interest rates,” Gerber explains.
At Experian, a poor credit score is anything below 598. At TransUnion, a below-average score is 527-582, an unfavourable score is 487-526, and a poor score is 0-486.
Such scores mean you are less likely to qualify for a loan as, based on your previous behaviour, there’s a good chance you won’t be able to repay or honour a new debt commitment.
“Remember that it’s also possible to not have a credit score at all. This is usually the case when a consumer still needs to build up a credit history,” says Gerber.
“Honouring your debt commitments over a prolonged period will vastly improve your score,” says Gerber. “Ensure that you pay the full amount by the agreed payment date, every single month.”
It’s preferable to have one or two accounts open and manage them responsibly over time, than to open a few accounts to try to improve your score.
Failing to pay your accounts on time will reflect on your credit report and hurt your score, says Chetty.
“Be clear about the due dates and pay on time and at least the minimum amount due. Late or partial payments may leave you playing catch-up with growing outstanding debt.”
He recommends limiting inquiries on your credit report and not applying for multiple credit products. “Too many applications in a short time could raise a red flag to your lenders about your current financial situation,” he explains.
DebtBuster’s Money Stress Tracker for 2023 indicates that around 62% of South Africans spend 40% or more of their take-home pay on debt repayments – way above the recommended 30%. Try to limit your reliance on credit as this may damage your credit score, especially if you incur judgments.
Gerber says you should check your score at least once a month to stay up to date with your financial situation. This is because your report is updated regularly with your latest credit information.
If you are struggling to service your debt, you may want to consider debt consolidation. This can bring you back to financial health and ensure your credit score remains robust.
Tip: A poor credit score may prevent you from taking out a personal loan, so be sure to manage your accounts responsibly.
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