What you need to know about credit scores
From what a credit score is to how it affects your ability to borrow money, here is what you need to know...
Millions of people in South Africa rely on taking on debt to afford things such as home loans and car finance.
Due to this reason, it is important to understand your credit score or what influences it so that you can be in a better position to apply for credit and be approved.
READ: NCR: More South Africans living on credit
What is a credit score?
Investopedia describes a credit score as a three-digit number that rates your creditworthiness.
What is a credit score based on?
Your credit score is determined by your credit history.
Your credit history is made up of total levels of debt, how you repay your debt, how long you have had the debt, the balance owed on your debt, and how many accounts you have.
All of these factors tell creditors how likely you are to handle the credit and whether you will be able to pay it back.
What is the benefit of a good credit score?
A higher credit score puts you in a better position to be approved for credit.
It also allows you to get a better interest rate.
READ: How to build your financial reputation from the first pay day
Credit score ranges
The following is taken from RCS:
Under 300: No Credit
300-579: Poor
580-669: Fair
670-739: Good
740-799: Very good
800-850: Excellent
Read more about how to improve your credit score here.
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