How to improve your credit score in South Africa

Understanding credit bureaus and credit scores in South Africa

To boost your credit score, first grasp how it relates to credit reports and bureaus. Understanding this connection is key.

What is a credit bureau?

When you apply for credit like you would for a bond, car or personal loan, one of the things you need is a good credit score. Credit bureaus provide lenders with information to determine if you are eligible for credit.

A credit bureau is a company that collects and maintains information on individuals' credit history. This information is then compiled into a credit report. By improving the information on your credit report, you will be positively affecting your credit score. We will discuss what is included in a credit report a little later in the blog post.

A key part of a credit report is your credit score, which shows how trustworthy you are with money. This score is based on the information in your credit report. Lenders use it to decide if they will give you credit and what interest rate you will pay.

A poor credit rating could mean two things:

• You will either be approved for a loan at a high interest rate.
• You won't be approved for the loan at all.

Below is a list of a few credit bureaus in South Africa.

You are entitled to request one free copy of your credit report each year.

1. Experian
2. TransUnion
3. Compuscan (now owned by Experian)
4. XDS

How do you check your credit score?

Experian

• You can access one free report per year through Experian’s CreditExpert service. Or you can pay R21 for a month’s subscription or R145 for a yearly subscription.
• Scores range from 0-705

TransUnion

• You can get access to your report once a year for free
• After your one free report you will have to pay R40 for one report or you can pay R40 per month for a subscription
• The score ranges from 0-999

XDS

• Credit4Life lets you get 30 days free access to your XDS report
• Or you can join the Credit4Life consumers club which gives you access to your report for R99 annually.

To improve your credit score, check out our article.

Understanding Credit Reports

A credit report is a detailed record of your credit history prepared by the credit bureaus. It assesses your creditworthiness and determines credit limits.

Some of the information included in your credit report:

• Current and previous addresses
• Employment History
• Number and type of accounts
• Payment history
• Account opening dates
• Credit enquiries
• Details of accounts handed over for collection or with judgments against you

Who Uses Your Credit Report?

Various entities consult your credit report, including:

• Current and potential credit providers
• Insurance companies
• Rental property landlords
• Potential employers
• Debt collectors
• Utility providers (cell phone, prepaid electricity, etc.)

The Importance of a Good Credit Rating

Maintaining a good credit rating is crucial, as it impacts your present and future credit applications. Below is a list of things that having a healthy credit report and credit score can help you with:

• Buying a house
• Buying a car
• Starting a business
• Getting a job
• Getting lower interest rates

Watch this video to get an in-depth understanding of credit scores in South Africa with Founder & CEO of Meerkat, David O'Brien

Tips to Improve Your Credit Score

• Make your payments on time each month.
  
  Pay the full monthly instalment amount on time for each account. If you're struggling to make payments, contact your creditors to arrange a payment plan. Not making your payments on time or not making them at all will negatively affect your credit score.
  
  Did you know: on time payments comprise 35% of your credit score.
• Watch your credit utilisation ratio.
  
  Your credit utilisation ratio indicates the percentage of the credit you have been allocated and how much you actually use.
  
  Limit your credit usage to under 50% of the given limit. For example, if you have a store card with a limit of R1,000, aim to maintain a balance under R350.
• If you have any outstanding judgements or administration orders, take immediate steps to repay the outstanding amounts in full.
  
  Once you pay, you can remove this information from your credit profile.
• Maintain a variety of credit types.
  
  This includes bonds, car loans, phone bills, and credit cards. This will help establish a strong credit history as long as your balances are up to date.
• Limit the number of account applications and enquiries.
  
  Too many applications can indicate financial distress or changes in circumstances.
• Regularly check your credit report and score.
  
  If you notice any discrepancies or potential identity theft, immediately contact the credit bureaus to dispute the information.

By following these pointers, you can improve your credit report and increase your credit score.

Who is Meerkat?

Meerkat is a registered financial services provider committed to empowering South Africans do MORE with their money. We do this by helping people:

• Get out of debt.
• Get affordable funeral cover that really covers the cost of funerals in South Africa. 
• Get credit life cover for when the unexpected happens.
• Build an emergency savings fund to ensure you stay out of debt!