What is a credit score and how does it work?
Your credit score is a single number (usually out of 1000) linked to your South African ID number, which represents how likely you are to repay your credit accounts. This score is determined by the various credit bureaus and is often referred to as your ‘credit worthiness’. A high number (say anything above 600 out of 1000) means that your credit worthiness is considered good. And a low number (say below 400 out of 1000) means that your credit worthiness is considered bad.
There are lots of credit bureaus in South Africa, and each sells their version of your credit score to their clients who include banks, loan providers, insurance companies, landlords, recruitment agents and collections agents, amongst others. These clients will then use this credit score to make a ‘decision’ about something. For example, a loan provider may use your credit score do decide whether to approve you for a loan or not. Or a landlord may use it to decide whether to let you rent their property, or whether they should choose someone else instead, who may have a higher credit score than you.
One of the oldest credit bureaus in South Africa was called ITC, however, in 2003 it changed its name to Transunion. Interestingly the name stuck, and so some people still refer to their credit score as their ‘ITC score’ – a little like how people still call any vacuum cleaner a ‘Hoover’.
Your credit score is built using all of your credit report data. Credit bureaus analyse millions of South Africans each month – they look at which credit products they have, what their payment history looks like and if they’re able to pay their bills. Using complex mathematical models, very clever data scientists then convert all of that information into a single score. And when this score is calculated using your specific credit profile – you get your unique credit score.
At MoneyShop we’ve created our own unique credit score too, called the MoneyShop Credit Score. Our score is also a score out of 1000, but it specifically represents your ability to be approved for a loan via the MoneyShop platform. In other words, 600 out of 1000 means you have roughly a 60% chance of being approved for a loan through us.
You credit score is quite possibly the most important single piece of financial information about you in the world. So everyone who cares about being financially independent should really understand what their credit score is and how it works in detail. More importantly though, you should know how to improve and maintain your credit score.
Most credit bureaus will charge you to access your credit report, however at MoneyShop we offer this service 100% free. Go to MoneyShop and get your free credit report, to see what your MoneyShop Credit Score is.