What is credit score and how does it affect me?

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When it comes your personal finances, understanding “credit score” is very crucial because, depending on what your personal credit score is, it will determine your cost of borrowing i.e. your interest rate.

What is a ‘credit score’?

A credit score is a score that usually ranges from 0 to 705 and it is used by banks or credit providers to determine whether you qualify for credit. Your credit score is based on your credit report, which is a record of your credit history showing how you have been paying your previous financial commitments.

Other information, such as court judgments against you or whether you are undergoing debt review form part of your credit report.

Your credit score is a useful indication of your creditworthiness, but banks and credit providers will look at other factors as well, i.e your income and debt levels, before deciding whether to extend credit to you.

Who calculates your credit score?

Your credit score is calculated by a credit bureau. There are four main credit bureaus in South Africa:

  • TransUnion;
  • Experian;
  • Compuscan; and
  • XDS.

How do you know if your credit score is good or bad?

The table below give an indication of score bands and are based on the Experian credit matric.

Credit scoreExperian band
0 – 527Very poorYou may not qualify for loans. Should focus on improving credit score
528 – 602PoorYou struggle to get a loan and interest rate will be higher
603 – 649FairYou will receive good deals at an acceptable rate
650 – 669GoodEligible for loan programmes and offers at a good rate
670 – 705ExcellentYou will easily obtain credit and top loan offers at the lowest possible interest rate

You can get your credit score calculated for free at clearscore.

What factors have an impact on your credit score?

  • Payment history is the most important ingredient in credit scoring, and even one missed payment can have a negative impact on your score.
  • Credit utilisation particularly as represented by your credit utilisation ratio, is the next most important factor in your credit score. The credit utilisation ratio is calculated by taking your total outstanding debt levels divided by total credit limits.

To illustrate say you have R100 000 in total credit limits and you have utilised R50 000. Your credit utilisation ratio would be 0.5 or 50%. The higher the ratio the more it will impact your credit score negatively.

  • Credit history length determined by how long you have held credit accounts open. The longer your credit history the more positively it will impact your credit scores.
  • Credit mix people with top credit scores often carry a diverse portfolio of credit accounts, which include a car loan, credit card, student loan, mortgage or other credit products.
  • New credit and number of credit inquiries the number of new credit accounts you have recently opened and when too many credit inquiries are done can indicate increased risk and can negatively impact your credit score.


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