In the eyes of your bank, your credit score is a large number above your head that shows them how risky you are. It is an important factor in assessing your chances of getting a house loan approved.
In South Africa, what is considered a good credit score?
Your credit score will be a three-digit figure between 0 and 999.
A credit score of at least 600 is required for the bank to examine your house loan application, and anything above 650 is considered good credit.
Here’s a more in-depth breakdown:
670+ = exceptional
650 – 669 = good
Average = 634 – 649
618 – 633 = less than average
Below 618 = really poor
How does my credit score get calculated?
On behalf of the bank, a licensed credit bureau will construct a record of your personal credit transactions and calculate your credit score based on the following:
Your track record of debt payback.
Money owing.
Credit types and frequency of application
How long have your accounts been open?
How much of your available credit are you utilizing?
Whether you have a history of failing to honor a debt commitment, which ended in bankruptcy or a judgment against you.
Why is having a good credit score so important?
As previously said, a solid credit score is required to have your house loan application accepted. Furthermore, it strengthens your bargaining position with the bank and increases your chances of obtaining a favorable interest rate on your house loan, saving you money in the long run.
Is it true that I have no chance of getting a home loan since I have a low credit score?
If the bank rejects your house loan application because your credit score is too low, you have two options:
Make an application to a different bank.
Concentrate on boosting your credit score before applying again in 6 to 12 months.
Varying banks have different lending standards, with some being more lenient than others. As a result, a different bank may be willing to accept a lower credit score.
How can I raise my credit score?
If you’d rather try to improve your credit score, boosting your chances of obtaining a home loan approved (as well as earning lower interest rates), there are a few options:
Pay any past-due bills.
Pay all of your bills on time.
Pay more than the minimal amount due on your invoices.
Clear your credit card debt.
Avoid exceeding your credit limit on credit cards and shop accounts.
Pay off retail credit, cell phone accounts, and bank loans, especially if you have other assets like a car.
Avoid opening new credit accounts whenever possible.
Check your credit report for errors and file a dispute with the credit bureau that did the calculation.
When you’ve paid off the balance owed, close your accounts.
How long does it take to raise one’s credit score?
Credit record improvements typically appear after three months, although it is advisable to wait six months before reapplying.
