Credit Scores Explained

Your credit score plays a vital role in your everyday financial life. Whether you are applying for a loan, renting a flat, or simply want to open an account with a retail store – your credit score is super important.
 Here are some questions – and answers – about how you can check your credit score and in turn manage it well.

What is a credit history?
Your credit history is an objective statement about your credit activity used by lenders to determine if you’re a credit risk. It contains information reported by companies who do business with you or have granted you credit.

What information is included in my credit history?
Information may vary by country, but in South Africa a credit history includes several sections:

  • Consumer-identifying information such as name and identification number
  • Account histories of your paying record with credit grantors
  • Public records of items that may affect your creditworthiness, such as court judgments
  • Enquiries, which list the companies that have requested your credit history

Your Credit Report does not contain information about your medical history, race, gender, religion, or national origin.

How Credit Histories are Used

  • When you apply for credit, such as a new credit card, the lender will request your credit history
  • The lender uses your credit history, along with other relevant information such as your income, to determine whether to grant you a credit card.
  • When you use the new credit card, the lender will periodically report your payment activities to credit reporting agencies.
  • Credit reporting agencies will update your credit history as they receive new information from lenders.
  • Your credit profile will change based on several factors, including how you pay your bills and how many loans you have. When you pay your bills on time, the information is shared with current and future lenders to help improve your credit history and make it easier to acquire credit in the future.
  • Each time you apply for credit, the process will be repeated.

What is a credit score?
In addition to your credit history, some lenders use a credit score to measure the likelihood that you will repay your loan. A credit score is generated by a mathematical formula that uses data from a Trans Union credit history. Lenders have been using credit scores as part of the lending-decision process for more than 20 years. They are widely used in South Africa, Namibia, Botswana, Swaziland, and many other countries around the world.

Who has access to my credit history?
You may access your personal credit history and authorize others to view your credit history. These parties may include companies that are extending you credit or with whom you are entering a legal relationship, such as signing a contract or opening a bank account.

How can you improve your credit history?
Regular review of your credit history is part of maintaining good credit. It’s important to correct any inaccuracies and pay your bills on time to get the best results from your credit history.

The frequency of your credit requests and how well you pay off loans or credit is a key part of gaining access to more credit.