Ultimate Credit Score Guide 2020
What is a Credit Score?
A Credit Score is one tool that lenders rely on in the first stages of a new credit application. They use it to see if it will be worth their while for your application to proceed in their application process. Your credit score is a three-digit number. In this Ultimate Credit score Guide 2020, we will discuss credit scores and the different credit bureaus' scores.
Your three-digit Credit score is a calculation out of a set of complex algorithms. These Algorithms use all your information from your personal report and generate a score.
In South Africa, most consumers are aware of these important scores. Most consumers will also already know that their score determines whether they will be successful in obtaining a loan, car finance, and home loan finance. Most consumers don’t know what their score is and are unaware that they have four credit scores and not just one.
While assessing a new application a lender will make use of different credit bureaus to analyze risk. It is vital to ensure that your credit score with each bureau reflects only correct information and gets monitored at least twice a year.
To illustrate this, we will make use of a real example of a client who we recently assisted.
Mr. and Mrs. X, married in a community of property, has been renting a two-bedroom unit for the last three years. Mr. and Mrs. X has been saving for a deposit for their own home and wants to start investing in their own home. Mr. and Mrs. X managed to save a 30% deposit. With plans to have children soon, they have decided this is the ideal time to ditch the rental unit and to buy a family home of their own. As this was their first time buying a house and uncertain of where to apply for the best home loan finance, Mr. and Mrs. X approached a bond originator. The bond originator applied for bond finance with all the major banking institutions in South Africa. The banking institutions all came back with different feedback with two out of the five banks coming back with an approval.
In this example, we can see all financial institutions will make use of different credit bureaus. Some will make use of one or two and in some cases, some banks will make use of all 4 credit bureaus.
Factors affecting your credit score
Registered NCR Credit providers in South Africa send information about repayments to all the credit bureaus in South Africa. The main four Bureaus in South Africa currently are Transunion, Experian, XDS, and Compuscan. In terms of the Credit Act, these bureaus may hold information about consumers and their account conduct for certain retention periods. This confidential information is then imported into a readable report and a score gets generated based on the information in the personal report.
Your credit report includes:
- Name and Surname
- Identity number
- Postal and Physical Addresses
- Default information. These listings include Judgments, Default listings, notices, administration orders, and debt counselling indicators. This information Affects credit scores
- Your credit provider details. It includes account numbers, balances, and monthly instalments. This information Affects scores
- Payment profile – this section analyses how you repay your accounts monthly. This information Affects scores
- Inquiries: When you make inquiries with credit providers. This information Affects scores.
Different credit scorecards for each bureau.
Below please see the different credit scorecards for each Credit Bureau.
Compuscan.
CompuScore aims to predict the probability of a serious default event occurring within 12 months. The CompuScore has a score range of between 480 and 700 points.
Compuscan Credit Score Categories:
688-700 Minimal Risk. You will get new account facilities and you will receive low-interest rate offers.
642-667 Low-Risk. A good credit score and you will still get new credit. You will receive a very low-interest rate offer.
622-641 Average risk. With a credit score in this range, you will still be able to get new credit. Credit will be more difficult to get and once approved you will get this credit at high interest rates.
480-621 Very high-risk. You will find it hard to qualify for any new account facilities. You should work on your credit score before applying for any credit.
Website: www.compuscan.co.za
Experian.
The Delphi Score combines market-leading expertise in credit scoring techniques. It uses a unique combination of data assets to deliver unrivalled accuracy in credit ratings.
Experian Credit Score Categories:
601-750 Very Good. You will get new account facilities with ease and at exceptionally low interest rates.
451-600 Good. You will be approved for new account facilities. You will receive low-interest rate offers when you fall in this credit score range.
301-450 Average. With a credit score in this range, you will still be able to get new credit. You will find it more difficult to get credit and once approved you will get this credit at high-interest rates.
0-300 Very poor. You will find it hard to qualify for any credit. You should work on your credit score before applying for any credit.
Website: www.experian.co.za
XDS:
The Presage Score got developed for the South African market. This XDS credit score card is a suite of predictive generic bureau application scorecards. The scorecard is out of a possible one thousand points.
XDS Credit Score Categories:
840 – 1000 Very Good. You will get new account facilities without any problems. You will also receive low-interest rate offers from registered lenders.
760-839 Above Average. You will be approved for new account facilities. You will also receive low-interest rate offers as a low-risk consumer.
680-759 Average. With a credit score in this range, you will still be able to get new credit, but it will be more difficult. Once approved you will get this account facility at high-interest rates.
0-679 Very poor and below average. You will find it hard to qualify for any credit. You should work on your credit score before applying for any credit.
Website: www.xds.co.za
Transunion:
Transunion Credit Score Categories:
650+: Excellent - Minimal risk. You will find it easy to qualify and get new account facilities. You will receive exceptionally low interest rates.
600 - 650: Exceptionally good - Minimal risk. You will still find it extremely easy to qualify and get new account facilities. You will also receive exceptionally low interest rates.
550 - 559: Good. You will qualify and get new account facilities with certain lenders. You might find it hard to qualify for new account facilities with some lenders.
0 - 549: Poor. You will struggle to get any account facilities. You should concentrate on working on your report before applying for new account facilities.
Website: www.transunion.co.za
5 Vital steps to Increase Credit Scores.
- Ensure all accounts, insurances, DSTV, and cell phone accounts get paid every month.
- Pay off smaller accounts. Keep outstanding balances low on your active cards and revolving account facilities.
- Only apply and open new account facilities only if you need to. Having many maxed accounts can harm your score.
- Don’t close any active accounts and store cards with a healthy history and generous limits. If you chose to close these accounts, it might impact on your usage ratios. This will affect your score.
- Analyze your report at least twice a year. Dispute any inaccurate information with the bureau.
Final Thoughts.
Having an excellent credit score will make things in your life easier. A good score will help you get new account facilities at lower interest rates.
If you are struggling to increase your credit score or need help paying your debts, Contact Us. We will ensure your score does not drop even further. We will provide you with a complete step by step guide on how to improve your scores with each bureau. We will also help you to remove or update any adverse information.
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