An Essential Guide to Credit Scores for South AfricansJanuary 28, 2021
For any South African, it’s common knowledge that credit scores play an integral role in one’s routine because of how applicable it is to nearly every part of one’s life. From paying your way through college to purchasing your first home, your rating will make or break the experiences that you’ll have in any situation involving money.
Now, while it may be safe to say that nearly every person is familiar with the concept of a credit score and its applicability in their lives, there’s one prevalent truth that remains: Many South Africans don’t know enough about the concept.
Thankfully, it isn’t too late to learn more about the score in further detail and ensure that you’re approaching it in the best way possible because we’ve got you covered with this in-depth guide:
What are credit scores?
The best way to define this financial concept is that it’s a calculation of how “credit-worthy” you are when you apply for a loan, bond, or any other form of finance.
Commonly found in your credit report, the figure attached to your name is used as a reference point for lenders to determine whether or not they should lend you the money. Through the help of your score, a service provider or lender can also easily and objectively determine how much you can afford to repay and the duration it takes for you to do so (especially considering that such scores are determined by past borrowing habits)!
How is the score calculated?
In South Africa, a credit score is calculated by firms based on different factors within your credit score and other related ones. For example, a government officer will first evaluate your payment history and gauge the score that you get from there on out. However, aside from past payment history, authorities also use other points of information like public records and inquiries to get a well-rounded figure!
What’s the range like?
When it comes to credit score ranges, it’s worth noting that South African lenders and financial institutions follow a scale of 330 to 850. The former is assigned to delinquent borrowers and the latter is associated with top-notch ones who have a history of paying on time (or even paying early). The gradient that people overlook when it comes to credit scores is that certain ranges can be associated with certain groups of borrowers and their repayment habits.
Based on the 330 to 850 score range, here are the three common groups of borrowers according to their credit score:
- 330 to 579: Low-priority or poor scores
- 580 to 699: Medium-priority or average scores
- 700 to 850: High-priority or excellent scores
Why is a higher score worth having?
Generally, the merits of having a higher credit score to work with are that they unlock or unveil many opportunities for increased convenience and other additional benefits. When you have a much better figure that is classified under the high-priority category, you’ll be able to enjoy these benefits:
- Eligibility for better-value loans and other financial tools
- Heightened chances of approvals for all kinds of loans
- Lower interest rates on various loans types
When it comes to the subject matter of credit scores, there are many different things that you can and should know about these figures because they’re guaranteed to hold an ever-important presence in your life. With the help of the key point mentioned above, you’ll be able to approach your financial health in a much more productive and effective manner without worrying about additional hang-ups along the way!
Are you looking for an online loan provider in South Africa offering personal loans that you can manage and use to handle your financial needs? We’ve got you covered – visit our website to apply for a loan today!