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What Makes Up my Credit Score in South Africa?

A credit score is often spoken about and used as a metric to judge the risk of our customers. This number can make a huge difference in your ability to negotiate credit and get better interest rates, but what is a credit score and what affects this number? 

Your credit score is designed to show you your credit history and the strength of your credit profile in a numerical form. 

What factors affect your credit score and how can you increase a credit score?

What Factors Make Up Your Credit Score?

In South Africa, the top two credit scoring agencies are TransUnion and Experian. While they can differ slightly in their scores and scoring methods, they both look at similar metrics. These metrics are used to produce your credit score. 

These are the four factors they look at:

Court Judgements and Defaults

A court judgment is when a court issues an instruction for you to pay your outstanding debt. This is often after a long period of the creditor trying to collect your debt from you. A judgement can stay on your credit report for five years. 

A default is when you fail to pay or fulfil a monthly debt commitment. This can negatively affect your credit report and your payment patterns. This stays on your credit report for 1-2 years depending on the score provider.

How Long You’ve Had Credit

The length of time you have had credit is a major factor in your credit report. Having a long credit record allows debt providers to better access your payment patterns and habits. This is why it is crucial to keep your accounts in good standing over the long run to build up a strong, healthy credit record which will lead to a great credit score.

How Much Debt You Have and How Much You Are Using

How much debt you have is another crucial piece of information on your credit profile that can affect your credit score. Debt providers in South Africa have to abide by strict regulations and guidelines set out by the National Credit Regulator. One of these regulations is to provide credit responsibly. How much debt you have proportionally to your income will affect how your credit profile looks to credit providers.

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 R10 000 and you are using R1000 of the R10 000 balance, your credit utilisation is 10%.

 The lower your credit utilisation the better. This is because using less credit than is available is linked with managing credit responsibly.

The Number of Credit Applications on your Profile

We all like to find the best deal, this leads us to shopping around and comparing different offers. Well, this is not the case with debt as multiple debt enquiries can look bad on your credit profile. A debt enquiry is when a debt provider requests your credit information when you apply for credit. This enquiry is logged on the system to allow other credit providers to see your recent applications.

Multiple applications over a short space of time are seen as erratic behaviour which leads to a lower credit score. 

How to Improve Your Credit Score in South Africa?

As with many things in life, prevention is better than fixing. So, working hard to keep your credit profile in good standing by paying your accounts on time and using credit responsibly. 

If you have found yourself in a situation where your credit score is low, hope is not lost! Our Bond Optimiser team has helped many people like you to consolidate your debt into an affordable repayment and to improve their credit scores. We do this through their 12-month program which includes an in house foundational financial literacy program through EdVance. This program is designed to give you the financial knowledge needed to achieve the financial freedom you have been dreaming of!

How to Check Your Credit Score?

Many of the credit regulators and credit scoring agencies advise checking your credit score at least once a year. This is to help combat fraudulent activity on your profile and to ensure you are keeping your credit healthy. There are several places you can check your credit score for free in South Africa. Here are some of the common places:

  • TransUnion – TransUnion is one of the top credit scoring agencies in South Africa and allows South Africans to get a free credit report once per year.
  • Experian – Experian is another one of South Africa’s top rating agencies. Experian similarly allows you to check your credit score once a year.
  • Your Bank – Many banks offer a credit score or indicator for their users. While this is not a full report it can give you a good indicator of your progress.
  • Bond Optimiser – We give free credit reports to our customers and applicants to help them stay informed.

While a credit score may seem like a confusing number, it is simple to understand when you break it down. It all comes down to how you have managed your credit in the past and how you are currently managing debt. 

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