A Credit Score Check Deep Dive: Demystifying the Numbers

by | Sep 13, 2023 | Personal Finance

If you know anything about personal finances then you know that a credit score check is a very important part of your money matters, but what are credit scores all about, and why do they even matter? Well, think of it this way: before a friend lends you money, they’d probably want to know if you can pay them back, right? That’s basically what banks and other credit providers are doing. They do a credit check to see how you’ve handled past loans, and then decide if they can trust you with their money.

Now, with so many websites promising a free credit score check, you’d think getting your score would be a walk in the park. But soon enough as you start to look into it you will find out that it is a little more complicated than that. In this blog, we’re breaking down all there is to know about checking credit scores, what these scores mean, how to make sense of them, and even throw in some handy tips to keep your score healthy.

What is a credit score

What is a Credit Score?

Simply put, a credit score is a three-digit number that reflects a person’s creditworthiness, helping credit providers assess how likely they are to repay borrowed money responsibly. If you’ve had a credit card, taken out a loan, or even just opened a store account, you’ve got a credit history. There are groups called credit bureaus that keep track of this for you. They take a look at how you’ve handled credit and boil it down to a simple three-digit number called a credit score. This number helps credit providers figure out how trustworthy you are with paying back money.

Understanding the Basics Of A Credit Score Check

If you’re asking yourself, what does my credit status mean and how does one go about checking credit scores? The simple fact is this: understanding how a credit score works all boils down to maintaining good numbers. When your score is high, it signals to credit providers that you’re a safe bet. This can lead to easy access to loans with favourable interest rates.

Conversely, a low credit score suggests a higher risk, making it trickier to secure loans or favourable credit terms. In essence, a credit score check plays a significant role in your financial journey, determining whether it’s going to be a smooth ride or a bit of a challenge.

Four Important Categories In A Credit Score Check

If you’re wondering what do I need to know if I want to check my credit score? The process of checking your credit score is probably easier to understand if you break it into its various categories. There are four main categories of information to focus on:

  1. Identification Information: The first category  encompasses personal details such as your name, ID number, employment history, property ownership, addresses, and contact information, all of which are crucial for identity verification by companies.
  2. Positive Information: This category aims to shed  light on your held accounts and showcases your positive payment history and status.
  3. Negative Information: Comprises details like default notices, court judgments, administration orders, debt enforcement notices, debt review notices, and late payments, all of which can adversely affect your credit score. Timely payments, on the other hand, have a positive impact on your score.
  4. Payment Profile: The fourth category, offers a historical record that spans up to five years, encompassing both negative and positive information, serving as a pivotal factor in determining the overall outcome of your credit score check.

Why Is A Credit Score Check Important?

As important as a credit score check is, surprisingly, only 188,000 individuals out of 25 million credit-active South Africans access their reports annually. This is concerning because a credit score in South Africa serves multiple purposes, including determining your creditworthiness, tracking how you handle your credit agreements, evaluating insurance applications, confirming qualifications and employment, and detecting and preventing fraud, corruption, or theft. It reveals vital information that plays a crucial role in various financial and personal aspects of your life.

While you might be able to get low credit score loans with a bad credit score, it is imperative to regularly check your credit score to plan your next move accordingly. It’s essential not to let credit providers and credit bureaus have more knowledge about your credit history than you do. Stay informed and in control of your financial standing.

How To Check My Credit Score

A credit score check in South Africa involves a relatively straightforward process. Here is a quick guide you can follow:

  1. Choose a Credit Bureau: South Africa has several credit bureaus, including Experian, and TransUnion amongst others which you can easily find via a quick “credit score check South Africa” Google search. You can choose any of them to check your credit score, as they all provide similar services.
  2. Request Your Free Credit Report: Thanks to the National Credit Act, you can have one credit report for free every year from any of the credit bureaus and you request it through the credit bureau’s official website.
  3. Provide Personal Information: To access your credit report, you’ll need to provide personal information, including your full name, South African ID number, contact details, and sometimes, proof of identity.
  4. Verify Your Identity: Some credit bureaus may ask security questions to further verify your identity. These questions could relate to your credit history or personal information.
  5. Review Your Credit Report: Once your identity is verified, you’ll receive your credit report electronically or via mail, depending on your preference. Take the time to thoroughly review the report, and keep an eye out for inaccuracies or discrepancies to dispute.

What Is A Good Credit Score

What Is A Good Credit Score

In South Africa, where credit plays a pivotal role in major purchases like homes and vehicles, having a good credit score can mean the difference between loan approval and rejection. But how do you know after a credit score check that you have a good score? In South Africa, credit scores typically range from 330 to 830. And the credit score scale is commonly interpreted as follows:

  • EXCELLENT: 767 – 999
  • GOOD: 681 – 766
  • FAVOURABLE: 614 – 680
  • AVERAGE: 583 – 613
  • BELOW AVERAGE: 527 – 582
  • UNFAVOURABLE: 487 – 526
  • POOR: 0 – 486

However, it’s worth noting that the exact scoring system may vary slightly depending on the credit union you use.

What To Do If There Are Errors On Your Credit Report

Your credit report is essentially a detailed record of your financial history, but it’s not always error-free. These mistakes can crop up in various forms during a credit score check, from accounts that don’t actually belong to you to outdated negative information that’s still dragging down your score. These inaccuracies can unfairly lower your credit score, which is why it’s essential to address them.

Fortunately, there’s no need to panic if you discover inaccuracies in your credit report. You have the legal right to dispute errors on your credit report, and it won’t cost you a cent. Simply reach out to any of the credit bureaus and say, there’s something wrong with my credit check.

The process might take up to 20 business days, during which the credit bureau will reach out to you for additional information and any supporting documents you can provide. They’ll also reach out to the credit providers or financial service providers involved to investigate and rectify the disputes. So, if you spot errors, don’t hesitate to take action to ensure your credit report accurately reflects your financial history.

How to increase a credit score

How To Increase A Credit Score

While the idea of living debt-free in a bid to increase your credit score may have its appeal, it can inadvertently limit your access to credit when you genuinely need it. The key lies in maintaining a reasonable amount of debt while building a positive payment history, which ultimately broadens your financial horizons over time.

But how can you embark on this journey to improve your credit score? Let’s explore five practical steps:

1.      Give Your Credit Score Check A Boost With a Store Card

For individuals new to the world of credit, a store card can be an excellent starting point. These cards are typically more accessible for those with minimal credit history and lower incomes. Many stores offer them to anyone aged 18 or older. These cards often come with credit limits based on your monthly salary, which allows lower-income earners to make manageable credit purchases while building a positive credit history. Over time, responsible use may lead to higher credit limits, and these will end up looking great on your credit score check.

2.      Reduce Credit Applications Appearances On Your Credit Score Check

Each time you apply for credit, it triggers a hard inquiry on your credit profile, potentially lowering your credit score. Avoid applying for multiple lines of credit or approaching several different providers simultaneously. This behaviour, known as credit shopping, can harm your credit score and reduce your chances of approval. Rather do a credit score check beforehand so you can be selective and strategic when applying for credit.

3.      Use Less Than Your Credit Limit

The proportion of your available credit that you use is an essential factor in your credit score. High debt repayments relative to your earnings or a high percentage of your total credit available can negatively impact your credit score. Credit providers want to see that you’re responsible with your available credit and not overextending yourself. Aim to keep your repayments at no more than 20% to 30% of your total monthly earnings to avoid becoming over-indebted.

4.      Maintain Good Results On Your Credit Score Check With Consistent Payments

Your credit score hinges largely on your payment history, so missing or underpaying on monthly instalments can seriously damage it, and late payments can haunt your credit report for up to five years. Always strive to pay at least the minimum amount owed on time. Consider setting up a direct debit order for the minimum payment after your salary is deposited. Paying more than the minimum whenever possible is a good financial habit that demonstrates your creditworthiness.

5.      Seek Assistance When Needed

If you find yourself unable to make debt repayments due to job loss or affordability issues, don’t wait. Act quickly and seek assistance from reputable debt management companies like National Debt Advisors to restructure your payments based on your current financial situation. Addressing this early can prevent your credit score from plummeting and help you regain financial stability faster.

Achieve A Favourable Credit Score Check With National Debt Advisors

Achieve A Favourable Credit Score Check With National Debt Advisors

In conclusion, if there is one thing we can all say with surety is that a credit score check is very important to maintaining a healthy financial standing. A simple credit score check free online can also help you get ahead of tough times during unexpected financial challenges, perhaps due to job loss or struggles with affordability. With a clear understanding of where you stand financially at all times, you are able to better navigate any curveball.

During these times, it’s essential not to hesitate when it comes to seeking debt help. National Debt Advisors can assist with this by restructuring your payments according to your current financial situation and this can be the key to preventing your credit score from dropping. By addressing these challenges early on, you greatly improve your chances of regaining financial stability and safeguarding your credit status.

If you’re ready to take control of your financial well-being, contact National Debt Advisors today. Our team of experts specialises in helping South Africans navigate the complex world of credit. From understanding the inner workings of a thorough credit score check to building a responsible credit history, National Debt Advisors is here to guide you every step of the way.

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