Everything You Need to Know About South Africa's Credit Bureaus
Credit bureaus play a critical role in determining your financial health in South Africa. They collect, maintain, and provide data on consumers' credit history, affecting your ability to access loans, credit, and even certain services. If you’re looking to understand how credit bureaus work and how they impact your credit score, this guide will cover everything you need to know.
What is a credit bureau?
Credit bureaus are organisations that collect and store information about your credit activity, such as loans, credit card payments, and other financial behaviour. They compile this data into credit reports, which are used by lenders, landlords, employers, and other institutions to assess your creditworthiness.
What are the main credit bureaus in South Africa.
South Africa has several credit bureaus, but the most prominent ones are:
- TransUnion
- Experian
- Compuscan (now owned by Experian)
- XDS
These bureaus gather data from various sources like banks, retail accounts, and debt collections agencies to build your credit profile.
How Do Credit Bureaus Work in South Africa?
Credit bureaus collect data on your borrowing and payment behavior, which is then used to generate a credit score. Lenders and service providers use this score to evaluate your ability to repay loans and manage credit.
Understanding Credit Reports
A credit report is a detailed record of your credit history prepared by the credit bureaus. It assesses your creditworthiness and determines credit limits.
Some of the information included in your credit report:
- Current and previous addresses
- Employment History
- Number and type of accounts
- Payment history
- Account opening dates
- Credit enquiries
- Credit score
- Details of accounts handed over for collection or with judgments against you
Who Uses Your Credit Report?
Various entities consult your credit report, including:
- Current and potential credit providers
- Insurance companies
- Rental property landlords
- Potential employers
- Debt collectors
- Utility providers (cell phone, prepaid electricity, etc.)
The Importance of a Good Credit Rating
Maintaining a good credit rating is crucial, as it impacts your present and future credit applications. Below is a list of things that having a healthy credit report and credit score can help you with:
- Buying a house
- Buying a car
- Starting a business
- Getting a job
- Getting lower interest rates
What is a credit score?
A credit score is a numerical representation of an individual's creditworthiness, which is essentially an estimate of how likely a person is to repay borrowed money. This score is derived from a variety of factors related to an individual's credit history and financial behavior. Credit scores typically range from 300 to 850, with higher scores indicating better creditworthiness.
How is a credit score calculated?
1. Payment History (35%): This is the most significant factor in determining a credit score. It reflects whether an individual has made their payments on time, including credit card bills, loans, and other financial obligations. Late payments, defaults, and bankruptcies can negatively impact this aspect of the score.
2. Credit Utilisation (30%): This factor measures the amount of credit being used compared to the total available credit. A lower credit utilization ratio is generally viewed more favorably, as it indicates that the individual is not overly reliant on credit. Ideally, keeping utilization below 30% is recommended.
3. Length of Credit History (15%): This component considers how long an individual has been using credit. A longer credit history can positively influence the score, as it provides more data on the individual's borrowing behavior. This includes the age of the oldest account, the average age of all accounts, and the length of time since the most recent account was opened.
4. Types of Credit in Use (10%): This factor looks at the variety of credit accounts an individual has, such as credit cards, mortgages, and installment loans. A diverse mix of credit types can be beneficial, as it demonstrates the ability to manage different forms of credit responsibly.
5. New Credit (10%): This aspect considers recent credit inquiries and the number of new accounts opened. While applying for new credit can temporarily lower a score due to hard inquiries, having too many new accounts in a short period can signal risk to lenders.
How do you check your credit score?
Experian
- You can access one free report per year through Experian’s CreditExpert service. Or you can pay R21 for a month’s subscription or R145 for a yearly subscription.
- Scores range from 0-705
TransUnion
- You can get access to your report once a year for free
- After your one free report you will have to pay R40 for one report or you can pay R40 per month for a subscription
- The score ranges from 0-999
XDS
- Credit4Life lets you get 30 days free access to your XDS report
- Or you can join the Credit4Life consumers club which gives you access to your report for R99 annually.
To improve your credit score, check out our article.
How to better my credit score fast?
Tips on how to build your Credit Score in South Africa
If you've ever found yourself searching for variations of "how to increase credit score quickly", "how to boost credit score fast" it's very important to understand that you can't improve your credit score immediately. There is no 'boost your credit score overnight' fix.
How to better my credit score fast?
Improving your credit score takes time, but it’s achievable with careful financial planning. Here are some tips to boost your score:
- Pay Bills on Time: Ensure all your payments are made on or before the due date.
- Keep Credit Balances Low: Avoid maxing out your credit cards or other forms of credit.
- Limit Credit Applications: Applying for too much credit in a short period can negatively affect your score.
- Monitor Your Credit Report: Regularly check your credit report for any inaccuracies or signs of identity theft.
- Pay your bills on time each month.
How long does it take for credit score to improve?
This will depend on your current standing. Did you know: if you've missed a payment or made a late payment, this can stay on your credit report for up to 7 years.
Watch this video to find out how debt counselling can actually help you build a good credit score:
Frequently Asked Questions About Credit Bureaus in South Africa
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Can I be blacklisted by a credit bureau? Technically, there’s no such thing as “blacklisting” in South Africa. However, negative information on your credit report can make it difficult to access credit.
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How often should I check my credit report? It’s a good idea to check your report at least once a year or before making any significant financial decisions, like applying for a home loan.
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How does debt review affect my credit report? Debt review is reflected on your credit report, and you’ll need a clearance certificate to remove this status once your debts are paid off.
Want to know more about how you can improve your credit? Contact us or explore our Debt Review services for expert advice and support.
Who is Meerkat?
Meerkat is a registered financial services provider committed to empowering South Africans do MORE with their money. We do this by helping people:
- Get out of debt.
- Get affordable funeral cover that really covers the cost of funerals in South Africa.
- Get credit life cover for when the unexpected happens.
- Build an emergency savings fund to ensure you stay out of debt!
