Discover how to build your credit score in South Africa | Investec
What is a Good Credit Score?
Having a good credit score is essential for anyone looking to take out a loan, rent an apartment, or even apply for a job. It is also a reflection of a person’s financial responsibility and trustworthiness. Credit scores range from 300 to 850 and can be influenced by a variety of factors. Understanding what constitutes a good credit score is the first step to building or maintaining a healthy financial future.
What is a Credit Score?
A credit score is a three-digit numeric expression of a person’s creditworthiness. It is calculated by credit bureaus, such as Experian, Equifax, and TransUnion, based on information from the individual’s credit report. This data is used to generate a score that ranges from 300 to 850.
How is a Credit Score Calculated?
The Fair Isaac Corporation’s (also known as FICO) scoring model is the most commonly used scoring system. This model takes the following five factors into consideration when calculating a person’s credit score:
• Payment History – This accounts for 35% of a person’s credit score. It is based on the individual’s history of on-time payments and any negative marks, such as late payments or accounts in collection.
• Credit Utilization – This accounts for 30% of a person’s credit score. It is based on the amount of credit a person has used compared to their total available credit.
• Credit History – This accounts for 15% of a person’s credit score. It is based on how long the individual has had credit accounts open and how often they have opened and closed accounts.
• Credit Mix – This accounts for 10% of a person’s credit score. It is based on the variety of credit accounts the individual has, such as credit cards, installment loans, and mortgages.
• New Credit – This accounts for 10% of a person’s credit score. It is based on the number of recently opened accounts and inquiries (requests for a person’s credit report).
What is a Good Credit Score?
A good credit score is generally considered to be a score of 670 or above. This is the score that most lenders look for when considering loan applications. Scores in this range are considered to be “good” or “very good” and indicate that an individual is a responsible borrower.
A score of 770 or higher is considered to be “excellent”. This is the score that many lenders use to offer the best rates and terms for loans and credit cards.
What is a Bad Credit Score?
A bad credit score is generally considered to be any score below 630. This is the score that lenders look for to determine if an individual is a high-risk borrower. Scores in this range are considered to be “fair” or “poor” and indicate that an individual may have difficulty obtaining credit.
A score of 300-579 is considered to be “very poor”. This is the score that many lenders use to deny loan applications.
How Can I Improve My Credit Score?
Improving your credit score takes time and dedication, but it can be done. The first step is to check your credit report for any errors or inaccuracies. If any are found, contact the credit bureau to have them corrected.
The next step is to pay down any outstanding debt. This includes paying off any past due accounts and keeping your credit utilization ratio below 30%. This can be done by increasing your available credit or paying down your balances.
Finally, be sure to pay all of your bills on time. Late payments can have a significant impact on your credit score, so it is important to make sure that all of your payments are made on time.
Key Points
• A credit score is a three-digit numeric expression of a person’s creditworthiness. It is calculated by credit bureaus based on information from the individual’s credit report.
• The most commonly used scoring system is the Fair Isaac Corporation’s (FICO) scoring model, which takes five factors into consideration when calculating a person’s credit score.
• A good credit score is generally considered to be a score of 670 or above.
• A bad credit score is generally considered to be any score below 630.
• Improving your credit score takes time and dedication, but it can be done by checking your credit report for any errors, paying down any outstanding debt, and making sure all of your bills are paid on time.
People Also Ask Questions
Q: What is a good FICO score?
A: A good FICO score is generally considered to be a score of 670 or above.
Q: What is a bad FICO score?
A: A bad FICO score is generally considered to be any score below 630.
Q: How can I improve my FICO score?
A: You can improve your FICO score by checking your credit report for any errors, paying down any outstanding debt, and making sure all of your bills are paid on time.
What is a good credit score? – Best Deal Right Now?
Building a good credit in South Africa starts with sound credit principles. Learn how to build your credit score and understand and manage debt as you apply for loans, such as vehicle finance or a home loan.
For more episodes, visit: https://invest.ec/3wTKdIL.
00:00 Introduction
01:02 What is a credit score?
01:51 Do you always take the loan you qualify for?
02:35 Good credit principles to live by
03:40 How do you build a reputable credit score?
04:35 How does your credit score work as a couple?
05:04 Good debt vs bad debt
07:44 Taking out debt for somebody else
08:23 Knowing your credit score
08:47 Financial planning – how do you do it?
10:09] Debt review or liquidation – what do you need to know?
10:48 Credit cards
12:15 How do you improve your credit score?
14:14 Top tips on credit
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