Everyone in South Africa is on a very personal journey when it comes to their credit, debt and personal finances. Everyone also has a credit score that gives a specific value to their situation and places them in a category. As important as these numbers are, not enough people take the time to find out their credit score. It’s worth discovering yours ASAP. If it’s good, there’s little to worry about and you should be able to borrow pretty easily. If it’s bad, you can improve it with various steps. So, what is a good credit score, and how do you find yours out?
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Why Is It Important To Know Your Credit Score?
Knowing your credit score is important because a bad one can have such a massive implication on your future life choices. Lenders will use a credit score to determine if you are someone they should work with. If you struggle to pay your debts, can’t pay your bills on time, and are generally bad with money, that’s a massive red flag. How can they be sure you’ll make the repayments on a loan, credit card, or mortgage? They may refuse to lend to you or give you a deal that doesn’t match your expectations. As scary as this sounds, credit scores are fluid. You can improve them with the right efforts. So, the sooner you know your score, the better.
Finding Out Your Credit Score
Some people have never checked their credit score. Some are too concerned that the number is really low. Others assume it’s too much hassle or too expensive to go through the process. That isn’t the case at all. You can apply for a credit report online via several legitimate sources. They will get a copy of your score and rating and send it to your device for free. As long as you have your ID to prove you’re authorized to see the report, it’s really easy to set up. You can also do this as often as you like, which helps when trying to improve a credit score.
What Is A Good Credit Score?
Your credit report will come with a number specific to your situation based on the different factors mentioned above. But what is a good credit score in South Africa? Well, the higher the number, the better the score. The South African system places everyone in a specific category. However, the threshold does vary depending on the company. The detailed system from Transunion, for example, works like this.
Starting at the lower end, anything from 0-486 is considered poor. You would have to be in some serious financial trouble to get something close to 0, which is why the bracket is so large. 487-526 is a smaller window that’s considered unfavourable. So, while it could be a lot worse, it’s still a long way from ideal. 527-582 is below average and still requires a lot of work to improve. Things then improve with average scores between 583-614 and favourable ones between 614-6680. If you end up with something higher than 680, you don’t have too much to worry about. This next level is good, and anything from 767-999 is excellent.
Other companies may be more simplistic. For example, you might see 0-449 as very bad, 450-549 as bad, 550-669 as fair, 670-749 as good, and 750-999 as excellent. The only problem is that it doesn’t quite align with other models, so it can be difficult to appreciate your exact situation.
Whichever system your credit provider uses, you will have a number and assessment. Once you have your score in front of you and know exactly what you’re dealing with, you can figure out the next step. Remember, there is always room for improvement in some form. Anything below average and lower will need a serious overhaul of your finances. Still, anything from average to good could benefit from some maintenance to improve the score. Willingness to improve and even the smallest effort could work in your favour. So, what should you do?
Improving Your Credit Score
One of the biggest causes of a poor credit score is outstanding debt. Now, credit score providers will often bluntly tell you to pay it off and see a big improvement in your score. A big change in your levels of debt could see you move into a new category. However, it’s not always that easy if you have a low income and other financial concerns. A good option here is to talk to companies that can help you consolidate debts and loans into easier payments. They may even be able to write some debt off for you.
Additionally, you can talk to your utility companies about payment plans if you are behind on your bills. If you can change your habits and show a new ability to pay bills in full and on time, this will also make a difference. You may be pleasantly surprised at the help available to do so.
If these new payment plans for bills and debt aren’t manageable, it might be time to take another look at your budget. The key to any good budget is balancing the income and expenses. Are you completely in control of all your expenses? Are there overdraft fees you hadn’t factored in? Are there subscriptions that increased in value that you could cancel? Be realistic without punishing yourself.
A Bad Credit Score Isn’t The End Of The World
Getting a bad credit score can seem like a disaster when the report comes back. Even an average rating can be disappointing if you expected something good or excellent. Yet, you should see this score as a warning light or a sign to make a change rather than a massive problem. Unmanaged credit scores can leave you struggling with credit cards, loans, and mortgages in the future. However, the right improvements now could get you back on track. Talk to advisors about improving your score and managing your debt and see what difference it could make.
