What is a good credit score in South Africa (+ examples)

Your credit score is REALLY important, yet somehow, not as clear as it could be.

Did you know that getting a loan with a bad credit score costs most South Africans tens of thousands of Rands (or more)? 

Your credit score matters. A LOT. That is why we’re sharing everything you need to know about what makes a good credit score in South Africa (plus a couple of examples of people that could have good or bad credit scores.)

Let’s go.

 

Credit scoring in south africa

A credit score is a numerical rating (in South Africa, it is between 0 to 1200 or 0 to 999, depending on the credit reporting agency) that credit providers use to assess an individual’s creditworthiness.

Basically, it is a number that institutions like banks, retail stores, cellular providers, etc., refer to determine how safe or risky it is to loan money to someone (or provide credit to them).

Credit scores are actively calculated based on a couple of important factors. Here are a few:

• Credit history
• Payment history
• Outstanding debt
• Credit utilisation (or usage)

 

 

The higher the credit score, the better. But we’ll go into more detail about what a good credit score is in South Africa in just a moment. Typically, you want your credit score to be higher than 600.

South Africa has four primary credit reporting agencies that collect and maintain credit information for individuals and businesses. The big four are:

• TransUnion
• Experian
• XDS
• ITC

 

Now let’s get into the ratings in SA.

 

Credit score ratings South Africa

Okay, so you know that credit scores range between 0 to 1200, but what is a good, bad, or average credit rating?

Exact ratings vary, depending on the credit bureau or the lender, but these ranges can be used as a rule of thumb:

• Excellent: 700 or above
• Good: 650-699
• Fair: 600-649
• Poor: 550-599
• Very poor: Below 550

 

Now, it is important to note that your credit score isn’t the only thing that impacts your creditworthiness. Lenders also assess your income, employment history, and debt-to-income ratio (that is why they ask you so many questions over the phone).

Furthermore, a bad credit score doesn’t exactly mean that you won’t qualify for credit or a loan. However, qualifying with a low credit score results in stricter contracts and higher interest rates (which means it costs more to lend money in the long run.)

Perfect, you’ve got a good grasp of South Africa’s credit scoring system, now, let’s move on to the good, the bad, and the average. Plus a couple of really useful examples.

 

 

What is a good credit score?

650+ is considered a good credit score in South Africa, and anything above 700 is considered an excellent credit score.

High credit scores = low risk to lenders (which means better rates and lower costs for borrowers)

A good credit score makes it easier to get approved for credit or any kind of loan and can even impact other areas of your financial life, so it is definitely worth making an effort to improve your credit score over time.

Examples of people with good credit scores:

• People that have had a credit card for several years and consistently pay on time.
• Anyone with a home loan, mortgage, or car financing that has been making regular payments for several years.
• Individuals with a stable income and a favourable debt-to-income ratio.

 

What is the pattern? A proven record of on-time payments and earning more than you owe.

 

Average credit score south africa

Around 600 is considered to be an average credit score in South Africa. So, being in the 600 range is neither deemed good nor bad.

In fact, you can celebrate if you’re in this range. It means you’re getting closer to having a good credit score and can even build towards an excellent score.

Examples of people with good credit scores:

• People that mostly pay on time but have also missed a couple of payments.
• Someone that doesn’t have a long or extensive credit history.
• Individuals with higher debt-to-income ratios.

 

What is a bad credit score?

A credit score below 550 is considered to be a bad credit score in South Africa. Again, this can vary between institutions, but generally, you’ll want to get your credit score above this range.

Getting access to credit or approved for loans becomes more challenging as credit scores go below 550. Anyone with a bad credit credit score can expect high-interest rates, strict terms, or simply getting denied by credit providers.

Examples of people with good credit scores:

• Individuals that regularly miss payments or default on loans
• People that have A LOT of outstanding debt.
• Others have a very short credit history or a high debt-to-income ratio.

 

 

Having a bad credit score sucks! It can be extremely difficult to improve your credit score when your finances are a mess.

If you owe more than you earn, then it might be worthwhile to consider applying for debt review.

One of the advantages of debt review is that it makes your debt affordable again and gives you a set schedule to repay all of your debt. It’s the first step towards a healthier credit score for A LOT of South Africans.

 

 

 

What is a good credit score to buy a house or a car?

Most of us care about our credit score so that we know that we’ll get great rates and terms when the time comes to take out a big loan.

That’s right when we wanna buy a house or a car.

As we’ve explained, your credit score impacts whether you qualify and what it might cost you (in additional interest) if you do.

So let’s examine the circumstances for buying a house and then buying a car.

 

What is a good credit score to buy a house?

The minimum credit score to buy a house or get approved for a home loan differs between financial institutions and lenders, but a general credit score above 650 is a good credit score to buy a house in South Africa.

But of course, the higher, the better.

 

What is a good credit score to buy a car?

The same is true for buying a car or getting car financing. 650+ is a good credit score to buy a car or secure car financing, but a score above 700 or higher is an excellent score to buy a car.

And again, the minimums differ depending on the institution or the lender.

Remember to take these factors into account too.

 

Factors that lenders assess for creditworthiness

In addition to reviewing your credit score and credit history, lenders could take these factors into account when assessing your creditworthiness for a mortgage or car financing:

• Income
• Employment history
• Debt-to-income ratio
• Deposit amount
• The type of car and the cost of the car
• The type of property and the location of the property

 

The simplest way to improve your financial health across all of these factors is to boost your income. We put together a list of high-paying jobs in South Africa for you to check out if you ever consider switching careers.

 

 

Final thoughts

Remember, a better credit score translates to more favourable rates, which means that you could pay less over time.

Over 5 to 20 years, each percentage point adds up. So get your credit report and start working on your credit score today.