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Understanding Your Credit Score


Knowing your credit score and what goes into it is important. You should check up on your credit score regularly and see how if it is improving or getting worse. Let’s explore exactly what goes into calculating your credit score.

There Are 4 Major Credit Bureaux In South Africa

It is important to note that, although each bureau gives you a score, these are not comparable. Each bureau has a different scale and different calculation, even though they use the same inputs to come up with a score.

In South Africa, there are four main credit bureaux namely, Compuscan, Experian, Transunion and XDS. Each bureau offers one FREE credit report per year as well as more comprehensive products which include detailed reports on a regular basis.

What Is Your Credit Score Used For?

Credit providers use your credit score to determine whether or not they will lend you money. A higher credit score increases your chance of getting credit, as well as getting better interest rates. A lower score reduces your chances and increases the cost.

How Is Your Credit Score Calculated?

Credit bureaux use your credit history to determine your credit score. They look at how much debt you currently have, how many credit enquiries you have made recently, how much debt you have used compared to how much you have access to and probably most importantly, your payment history.

If you have missed many debt repayments or short paid accounts, your score will reduce. A credit provider won’t want to lend you money if you have missed lots of debt repayments in the past. Your credit report also shows any defaults or legal action that has been taken against you. These negatively affect your credit score and chances of getting more debt.

What Happens If My Credit Score Is Low?

The term “blacklisted” is often used for consumers that have low credit scores, read more about that HERE. Being blacklisted refers to a low credit score resulting in credit providers denying you credit. By paying your debts on time and catching up on missed payments you can improve your score.

It is also important to regularly check your credit report to identify any fraud or ID theft. If somebody steals your ID book or hacks your personal details they could use this to open credit cards, accounts or take out loans. You can pick this type of activity up on your credit report and put an end to it before it’s too late.

If you credit score is very low and you cannot get any more debt, you should consider talking to a debt counsellor. A debt counsellor can access your credit report and give you a full summary and understanding of it, thereafter, they will walk you through your financial situation and see if they can help you with an array of debt solutions. Read HERE on how to choose the right debt counsellor and HERE on the misconceptions of the debt counselling process.

4 thoughts on “Understanding Your Credit Score

  1. Thanks for the article. What is not explained here is how the bureaux view the proportion of debt the individual accumulates relative to the maximum amount one is allowed. For example with credit cards, is it better to have a credit limit of 10 000 which one uses up to 90% each month or is it better to have a credit limit of 20 000 and only use 50% of this facility? Both of these scenarios assume paying the full amount each month so as to avoid finance charges.

    1. Hi Alex. Thanks for reading our article.
      The question you are referring to is called “Debt Utilization”. Without considering the income,a lower debt utilization is considered better. In other words, it is better to have a credit limit of 20000 and only use 50% than have a credit limit of 10000 and use up to 90%. As it is an indication that you are not maxing out your debt facility.
      I hope this answers your question.

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