Publish Date: 07/03/2019
One of the quickest ways to check the state of your financial health is through your credit score. It is a quick and easy exercise and, to top it all off, it does not cost you a cent.
As a consumer, most credit bureaus allow you to access one free credit report a year. At African Bank, you can access your credit score as often as you like – we suggest once a month.
So what is a credit score and why is it so important? Your credit score is a history of your past financial behaviour in terms of how you have used and managed credit. Your credit report is a summary of information that can possibly affect your creditworthiness. This information includes a history of non-payment and notices or judgments under your name, as well as an overview of any amounts you currently owe on credit.
Credit score guideline
650 - 999 is minimum risk
620 - 649 is low risk
600 - 619 is average risk
581 - 599 is high risk
1 - 580 is very high risk
From the guideline above, it is clear that for banks and other credit providers to approve your request for credit, your credit score needs to be good – they need to know that you will make regular payments and pay off your debt within the times indicated on your contract. Having a good credit score works in your favour because your bank can potentially give you a loan with a lower interest rate. Remember, the higher the interest on a loan, credit card, overdraft etc., the more money it costs you to service the debt. Keeping your credit score high therefore informs your bank that there is a low chance of you defaulting.
If, however, you do not have a long history as an active credit user — for example, you have just finished university and you are starting your first job, or you have just never had the need to access credit — this can be a disadvantage. The reason is that before your bank gives you a credit line, they need some way to measure or predict that you will be able to pay your obligations on time. Perhaps then, the best way to build your credit score is to take out a cellphone contract or open up a credit card with a minimum balance that you can pay without putting yourself under financial strain.
For you to maintain a good credit score or improve it, all you have to do is pay all your obligations on time or, even better, pay a little extra every month towards your debts.
If you’re thinking about buying a car or a house and you plan to apply for car financing or a bond, check your credit report before meeting with a lender. Being familiar with the information in your credit report provides clues as to whether a lender will approve your request or not. It also shows that you care about your credit score and have taken responsibility for it. If you are in good standing, your credit report can also be a powerful negotiation tool for a lower interest rate.
The benefits of knowing your credit score go beyond just being able to borrow money from the bank. Going through your credit report can also inform you if you are a victim of financial identity theft. Your credit report will allow you to spot, for example, a judgment against you for an account you know very well you never opened or a line of credit you have never applied for.
Having your identity stolen can ruin your credit score and cause havoc in your financial life. Request your credit report once a month to ensure your credit profile remains accurate — it is free with African Bank and is a powerful tool.
About African Bank
Our mission is to be a successful Retail Bank offering a wide range of products and services to the consumers of South Africa. The people who work for African Bank represent the diverse population of South Africa; therefore we are a reflection of you, of all South Africans. We seek to provide value - more than our consumers expect of us. We promise to live our purpose 'humanity through banking' in all that we do and we are confident that we can, because 'We are You'.