Everything you need to know about credit scores

Credit score. It’s a term that you might have heard uttered with some trepidation. Most people know that it determines whether or not they qualify for a loan and what kind of interest rate they get, but don’t know how it is calculated and how to check what it is. If this is your understanding of credit scores, read on. Here you’ll find a quick run-down of everything you need to know about these feared risk assessments.


Credit providers use your credit score to determine whether you qualify for a loan and how much interest you should pay. A high score indicates a low risk borrower, while a low score means a high risk borrower. The following is a rough guide to the Delphi system (used by Experian) .

650+: Excellent credit. These individuals will easily obtain credit and receive very low interest rates.
600 - 650: Very good credit. These borrowers can get the best loan programs and offers at a good rate.
550 - 600: Good credit. Individuals with this score will receive good deals at an acceptable rate.
490- 550: Sub-prime. These people may struggle to get a loan and their interest rates will be higher.
490 and below: Poor credit. Individuals in this category may not qualify for loans and should focus on improving their credit score.

The higher your credit score, the lower the risk you pose to a lender. If you’re a lower risk borrower, these institutions will be more likely to give you credit, and you’ll find it easier to qualify for a home or vehicle loan. If you have such a credit score (650 and higher) that’s great. If you don’t and you want to qualify for the best loan terms possible, you’ll have to improve your credit score.


Everyone has a credit report that contains a complete record of your financial history, including account information, payment history, amounts owed, age of accounts, judgements, defaults, and a list of occasions on which credit providers requested to view your credit report. Together, these factors are considered to be a good indication of how likely you are to honour future credit commitments.


Your credit score isn’t a fixed number as it varies according to the scoring systems of the different financial institutions. Each have their own way of calculating a credit score, but all rely on one thing: a credit record. So, if you have no credit record, you won’t have a credit score.

While this may seem like a good thing, it isn’t. Without a means of determining your risk level, lenders won’t give you a loan. You have to have a credit score to qualify for credit, and that means taking on small loans that are easy to qualify for. If you are responsible about paying these back, you can establish a good credit score.


By law, South African citizens are entitled to one free credit report per year from one of the credit bureaus: TransUnion, Compuscan, Experian, and XDS. If you want to get more than one credit report in a year, you can get a second from any of the previously mentioned credit bureaus for a minimal fee. And, you can also get a free credit report from ClearScore. You can learn more about this great service in our article on how to check your credit score.


You may find that your credit score isn’t what you had hoped it would be. The good news is that there are a few simple steps you can take to improve your score. To start, you can avoid paying late or missing payments. Just by paying on time, you display the kind of responsible behaviour that bureaus and institutions consider to be the mark of a lower risk borrower. There are of course other measures you can take to improve your risk profile. To learn more about these, read the next blog in this series – How to improve your credit score.