When you apply for a bond, one of the first things your bond originator or bank will do is check your credit score, that all-important indicator of the level of risk you represent to the lender.
“A good score is the key to being able to access all forms of credit – including car loans and store accounts as well as home loans – and is based on your history of payment on all previous and current accounts, as well as the percentage of your available credit already being used,” says Rudi Botha, CEO of BetterBond, SA’s leading bond originator.
“It is a quick way for lenders to gauge your ability to repay your debts and manage your finances responsibly and is so widely used that is it very surprising to us that most South Africans have no idea what their score actually is, or what factors could exert a positive or negative effect on it.”
The different credit bureaux in SA all have slightly different ways of calculating your credit score, he says, but in general scores range from around 350 to 999, and what you should be aiming for is a score of 600 or more. “At this level, you should not have any problem getting a loan, provided it is within your means to pay the monthly instalments.
“And the higher your score is above 650, the more likely you are to be able to negotiate interest rate concessions, which in the case of a home loan can save you hundreds of rands a month – and many thousands of rands over the life of the loan.”
This is why it can come as a big disappointment to find that your credit score is not as high as you thought it would be, especially when you’re diligent about always paying your bills on time, says Botha. “Fortunately, however, most of the reasons this could happen are relatively easy to fix.”
*BetterBond is our preferred mortgage originator. Its statistics represent 25% of all residential bonds being registered in the Deeds Office and are thus a reliable indicator of the state of South Africa’s residential property market.
